Did your employer auto-enroll you in a retirement savings plan when you started your job? If so, your employer is following a trend that has been emerging over the past ten years or so. Auto-enrollment means just what it sounds like: you are automatically signed up for the 401(k) plan (or whatever plan your employer offers). People can opt out, of course, but if they’re typical human beings, they probably won’t make the effort to opt out. [Yep, most of us give in to inertia — just leave things the way they are!]
Auto-enrollment is a good thing, over all. It helps people get started with retirement savings. But just because you were auto-enrolled, that doesn’t mean that you should stick with auto-pilot for the long term. Here are a couple of ideas to consider, either when you start or sometime down the road:
- Consider gradually increasing your contribution. Many employers auto-enroll employees at 3% of their pay. Saving three percent over the long-term is not enough for most people to build retirement security. If you increase your contribution every year when you get a raise, you’ll hardly miss the money.
- Maximize your employer match. Some employers match contributions up to 5% of pay — or higher. If you are enrolled at 3%, but your employer would match 5%, then you’re not taking advantage of all your employer might offer.
- Examine the “automatic” investment selection. Most employer-based retirement plans offer several different types of investments (usually a selection of mutual funds). Employers usually chose a moderate-to-conservative investment when they auto-enroll their employees. At some point, when you have had a chance to learn about the options, it would be wise to evaluate whether the automatic option was the best one for you.
Read more tips from FINRA (www.finra.org), which is an excellent source for investing information.