Forex Articles

According to the Bureau of Labor Statistics, more than two-thirds (69%) of American workers have access to an employer-sponsored retirement plan. But only 53% participate in one.

And that's a problem. More people aren't saving enough for retirement, and that means they'll need to work longer or face a significant reduction in lifestyle once they do retire. (And that's the most optimistic view. A major illness or disability, and the medical expenses that come along with it, could torpedo more than those nice to haves – such as annual vacations and the ability to eat out a few times a month – we typically associate with the word lifestyle.)

On the plus side, many employers are committed to helping their staffers properly prepare for retirement. Here are some of the tricks they (abetted by their plan administrators) use to get you to contribute more (or contribute, period) to your 401(k), 403(b) or other plan.

When a company sets up a negative election system, it means employees are automatically enrolled in the retirement plan and must opt out if they'd rather not participate. It basically takes advantage of the power of inertia, and turns any tendency toward procrastination on its head: Instead of delaying an employee's participation (and saving), it delays his or her not participating. See 401(k) Auto-Enrollment: The Best Savings Plan to learn more about the benefits of negative election.

A negative election option gets more employees into the plan, but it doesn't ensure they'll save enough to retire comfortably. Enter automatic deferral increases (also known as auto escalation policies). Under this policy, the amounts an employee contributes to the plan will automatically increase a percentage point or two each year until savings reach a pre-determined limit (typically 10% of wages). Like negative enrollment plans, auto escalation policies force employees to act if they don't want to participate, and most employees simply won't bother.

It's been well documented that saving sooner rather than later is better, and one way employers encourage early retirement plan participation is by eliminating waiting periods for eligibility. Employees lucky enough to have access to one of these plans can begin socking away money with their very first paycheck.

An employer matching the employee's contributions (one of the original selling points of 401(k)s, back when they started) is a terrific incentive to save and is known to increase participation rates. Unfortunately, in 2008 and 2009 (the early years of the Great Recession), nearly one in five companies with at least 1,000 workers reduced or eliminated their match. As the economy improved, however, companies inched their way back. By 2011, "USA Today" reported that most companies had restored their retirement-plan contributions.

Still, every eligible employee doesn't take full advantage of the match. A May 2015 report issued by Financial Engines, an investment advisor firm, found that 25% of workers were not funding their plans sufficiently to receive the full amount of their employer match. See If Your Company Is Matching 401(k)s, Max It Out! to learn why leaving this free money on the table is a bad idea.

If your company doesn't offer a match, see When Your Employer Cuts Your 401(k) Match for tips on maximizing your savings regardless.

More than one study has documented that Americans are woefully under-informed when it comes to money matters. (See 5 Articles to Refresh Your Financial Literacy if you feel you're one of them.) Figuring that an employee who understands the basics of financial vehicles and investment strategies is more likely to become a plan participant, many companies are offering crash financial-education programs. These take many forms, from handing out literature to conducting workshops or webinars. Employers may choose to handle everything in-house, or they may engage with local financial institutions to conduct a seminar, for example. Another option is asking the company's financial broker or retirement plan administrator – or even a fund investment manager – to make a presentation, especially when open-enrollment season rolls around.

Financial literacy has an impact on financial decision-making, including decisions about retirement. By increasing employees' overall knowledge about finances, employers hope to inspire workers to take concrete steps toward improved fiscal health (and increased funds in their retirement accounts).

Employees have all kinds of reasons for not participating in retirement plans – from lack of funds to lack of financial understanding to simple procrastination. But, like any good salesperson with a product to peddle, the best employers know all the objections and have devised ways to overcome them, with a variety of tricks to encourage saving: negative election, automatic deferral increases, eliminating waiting periods, matching contributions and financial education programs. And these are the sort of tricks that will yield treats, in the form of more money to live on, after your workdays have ended.