I wrote this piece for our company newsletter recently. I’m a big believer in educating our employees on the importance of saving for retirement, and when I heard about a new tax change this year, I just knew I had to write on it. If you are interested in using it for your own company, feel free to copy/paste this post for your people. Enjoy!
2%-What\’s it to you?
If you hang around the financial news section, then you might have heard something about a change in your withholding taxes for 2011. Why does this concern you? Well, according to CNN Money, only 16% of people are confident in their ability to save for retirement. It\’s frightening to hear news like that, but there is a positive side to this situation.
To adequately prepare their finances for the golden years, Americans need to be saving 6-10% of their salaries throughout their working lives. If you are investing in your 401(k) account to the full match (average company matches 3%), then you are barely reaching the bottom end of the spectrum.
So, what does this have to do with the change in taxes this year? Well, as a result of one of the new laws by Congress, 2% of your normal social security payroll taxes will not come out of your check this year. If you\’ve been holding off on participating in the 401(k) program, now\’s the time to make the leap! If you already contribute, this is a great way to bump up your contribution to make sure you are adequately covered in your retirement savings.
Here\’s a quick example of the power of 2%. If an employee makes $50,000 per year and puts this 2% ($1000) into an average mutual fund in their 401k account for 25 years without adding anything else in that time, that would total more than $17,000. If you\’re not currently participating in the 401k program and that 2% election is eligible for matching, that could double the amount to $34,000. Not enough to retire on, but not something to sneer at, either.
If you\’re interested in learning more, joining the 401(k) program, or just figuring out what is right for you, feel free to contact your plan administrator for assistance.
What do you think? Good? Bad? Ugly? :-)