He started a new job, passed orientation, and even enrolled in his company’s 401(k) plan. But if a new survey is any indication, you might want to double-check that last point.
It turns out that some workers may be misinformed when it comes to preparing for retirement. In fact, 59% of those who currently do not contribute to their 401(k) or other workplace retirement plan believe they do, according to a recent survey from Principal Financial Group. More than 75% of those employees believed they started saving as soon as they were eligible to contribute.
Amy Friedrich, director of benefits and protections at Principal, says the company is conducting additional research into why such a disconnect exists. But one reason could be that 40% of employees have had more than one job in the last five years, and while they may have been automatically enrolled previously, their new job may require manual enrollment. They could also be putting off enrolling or paying off debt instead of making retirement contributions.
Friedrich also says the shift from physical to digital paychecks could also be causing confusion: Workers now have to look harder for a breakdown of their pay.
“Employees face a patchwork of inconsistent standards for auto features, which has unfortunately led to inaction and misunderstandings around retirement benefits,” Friedrich says.
Whatever the reason, the trend is worrying and could hinder many workers’ wealth accumulation. This is especially true for younger workers, who will benefit the most from investing earlier.
That said, Principal’s survey finds that the generation most likely to say they’re investing for retirement when they’re not is Gen a few years from the traditional retirement age. Previous surveys have found that members of Generation Non-retired Generation Xers are not confident in their ability to retire comfortably.
Principal notes that the confusion means many workers will have to catch up on their savings if they want to retire comfortably.
If this article makes you question whether you’re really investing for retirement, there are several ways to check. One is to look at your most recent pay stub and another is to call your account provider or verify your account online.
Once you’ve confirmed that you’re booking something, you may also want to consider whether you’re booking anything at all. enough. The right amount will, of course, vary depending on age, goals, etc. of the person. But financial advisors say the goal is between 12% and 15% of your salary. That includes any kind of employer contribution, so if your boss matches, say, 6%, you’re in good shape.
If you don’t have access to a retirement account at work, you can start your own. These accounts, called individual retirement accounts or IRAs, are tax-advantaged like 401(k)s and allow you to invest up to $7,000 per year or, for people age 50 and older, up to $8,000.
Another thing you should check is whether you are actually investing the money you are contributing to your 401(k) or IRA. It is not uncommon for workers, especially young ones, to start setting aside a percentage of their salary each month without selecting actual investments, often stock- or bond-based funds.
All that said, Friedrich says, employers also need to step in and take a more proactive approach to helping their employees understand their benefits, through increased education and communication.
“Not only can this help alleviate financial stress,” he says, “but it can also help employees stay engaged and focused on doing their best work.”
