Each year, on the Friday after Labor Day, the Plan Sponsor Council of America recognizes National 401(k) Day. On this day, we put retirement savings in the spotlight and assess how we are progressing toward our retirement goals. We also use this day to encourage business owners to sponsor retirement programs for their employees and educate employees on how to make the most of their company-sponsored benefits.

However, we recognize that 401(k) plans can be confusing to understand, especially since each person has their own specific retirement goals to work toward. In this blog, we discuss the common pain points of investing in 401K(k) plans and how to maximize your plan’s benefits.

Common Pain Points

According to a 2023 survey conducted by CNBC, nearly 4 in 10 workers that have a 401(k) plan offered by their employer do not contribute to their plan.1 This is a staggering figure because not contributing to a plan can prevent workers from having financial stability later in life when they want to retire. However, there are several reasons why workers may be hesitant or completely avoid contributing to a plan:2

  • Different rules for different employers. When you change jobs, it’s likely that your new company’s 401(k) plan has different rules and options than a previous employer’s. Some employers automatically enroll their employees into a plan while others require the employee to enroll themselves. Additionally, it can be laborious to rollover a 401(k) from one retirement savings company to another.
  • Uncertainty about contributions. Many Americans are unsure about how much they should be contributing per paycheck in order to comfortably retire. This may be due to not knowing where to start in terms of creating a savings goal.
  • Cash constraints from the increasing cost of living. In the past couple of years, inflation and high interest rates have caused many Americans to re-evaluate where they are spending money. As a result, many have opted to prioritize paying for non-discretionary expenses rather than saving.

Tips for Optimizing Your Retirement Savings

Start contributions early. It’s best to start saving for retirement as soon as you start your first job out of college. If you’re a parent and your child is working while in high school, review their benefits with them and see if they can begin making contributions as a teenager.

Take advantage of matching contributions. Most employers match their employees’ contributions by a certain amount – for example, they may match 50% of your contribution up to 6%, which means if you contribute 6% into your 401(k) or 403(b) account, they will contribute 3%.3

Select personally compatible investments. When investing in a 401(k) or 403(b) plan, select investments that align with your personal risk tolerance and investment preferences.

Avoid early withdrawals. Withdrawing money from your retirement plan early can be costly due to taxes, fees, and penalties.

Check in periodically. Long-term investments like 401(k)s are easy to forget about. However, you should monitor your account periodically and make adjustments as needed.

We understand that understanding 401(k) plans can be confusing. However, you’re not alone. If you have not yet taken advantage of your company’s retirement benefits and want to get started, or would like someone to review your contributions to see if you are on the right track, please reach out to your advisor.

 

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Hightower is a group of investment professionals registered with Hightower Securities, LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities, LLC; advisory services are offered through Hightower Advisors, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. All data and information referenced herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices or other information contained in this research is provided as general market commentary; it does not constitute investment, tax or legal advice. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Hightower or any of its affiliates shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. Forecasts represent median expectations and actual returns, volatilities and correlations will differ from forecasts. These materials were authored by Fiducient Advisors and are being used with their permission. This document was created for informational purposes only; the opinions expressed are solely those of the author and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

Citations
1 Epperson, S., & Dhue, S. (2023, September 7). Is financial stress hurting retirement savings? 4 in 10 workers with a 401(k) don’t contribute, CNBC survey finds. CNBC. https://www.cnbc.com/2023/09/07/4-in-10-workers-with-a-401k-dont-contribute-to-plan-cnbc-survey.html

2 Why are employees not participating in their 401(k)s? (n.d.). Principal. https://www.principal.com/about-us/retirement-research-and-thought-leadership/employee-401k-participation

3 Piburn, B. J. (n.d.). What is 401(k) matching and how does it work? Empower. https://www.empower.com/the-currency/work/how-does-401k-matching-work

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6 Meridian is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. 6 Meridian and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. 6 Meridian and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

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