<p style="margin-bottom: 7.5pt; line-height: normal; background-image: initial; background-position: initial; background-size: initial; background-repeat: initial; background-attachment: initial; background-origin: initial; background-clip: initial;">Theonly way you could join your company's 401(k) plan, 403(b) plan, or 457(b) plan was to put pen to paper and sign yourself up by filling out the appropriate<br>
forms. Now, though, in an effort to help participants increase their retirement
savings, some employers have begun enrolling their employees automatically. With automatic enrollment, you don't fill out a form to opt into your company's
retirement plan; you only fill out a form to opt out of it.
At first glance
enrollment sounds like a no-brainer--without doing anything, you're
on your way to saving for retirement. But don't just assume that the investment
decisions your employer has made on your behalf are right for you. Instead,
charge of your own retirement savings right now by following these four steps.
Step 1: Get the facts
you work for a company that offers
automatic enrollment, your employer will typically enroll you once you meet the
retirement plan's eligibility requirements, and will begin to direct a certain
percentage of your paycheck (your contribution rate) into the investment fund
the company has chosen as its default.
make the mistake of thinking you
have to stick with the default elections your employer has chosen for you. Once
you've been automatically enrolled, you can increase (or decrease) your
contribution rate, move money from one investment option to another, or even
opt out of the plan altogether. You may even have the right in some cases to
request a refund of amounts automatically withheld from your pay.
employer is required to send you
information about the plan provisions and your investment options, along with
specific instructions on how to opt out if you choose not to participate in the
plan. Read the documents you receive (including your plan statements), and ask
questions about anything you don't understand before making any investment
Step 2: Consider your contribution rate
many people, you may be tempted to
stick with the contribution rate your employer has chosen for you. But this
contribution rate (typically 3 percent) may be less than you need to contribute
to target your retirement savings goal. Find out, too, if your company offers
matching funds (employers who offer matching funds to traditionally-enrolled
plan participants must offer the same match to automatically-enrolled
participants). If so, try to contribute at least enough to receive the full
match. (401(k) plans with qualified automatic contribution arrangements (QACAs)
are required to make a contribution on your behalf.)
Step 3: Review your investment options
you're automatically enrolled,
your contributions are invested in the plan's default investment option
(typically a fund that includes a balanced mix of investments). But investing
in the default option may not be the best choice for you. Depending on how much
you need to save for retirement, how far away you are from retirement, and your
tolerance for risk, you may want to redirect some of your contributions into
more aggressive options that, although more volatile, offer greater potential
for long-term growth.
Note: Before investing in any mutual fund,
carefully consider its investment objectives, risks, fees, and expenses, which
can be found in the prospectus available from the fund. Read the prospectus
carefully before investing. There is no guarantee that any
investment strategy will be successful; all investing involves risk, including
the possible loss of principal. Investments seeking to achieve higher returns
also involve a higher degree of risk.
Step 4: Check up on your plan at least once a
if you've decided to stick with
your company's default options for now, review your investment options at least
once a year, keeping in mind the following questions:
you saving enough?
you afford to contribute more?
the investments you've chosen still appropriate for your age
and risk tolerance?
you need to redirect all or some of your contributions to
better target your retirement savings goal?
you make decisions, think about your
overall retirement plan, including where your retirement money will come (e.g.,
Social Security, 401(k) plan, pension plan), the major expenses you might have
(e.g., housing, medical care), and the lifestyle you hope to lead (e.g.,
traveling frequently, owning a second home).
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