Make Retirement Savings a Priority

When household budgets are stretched, it's easy to put the event that's furthest away on hold. For most people, that means retirement. But more than ever before, getting ready for your retirement years down the road requires careful planning today. By taking full advantage of the retirement account available to you at work, you will be putting a plan for retirement into action.

Benefiting from the Basics

Participating in your employer-sponsored retirement plan includes many benefits that help move retirement savings to the top of your financial priority list. Enjoy these savings advantages:

Tax breaks

The money you contribute to your employer-sponsored retirement plan each paycheck is deducted from your pre-tax income. That means the income taxes you owe are calculated after your contribution is taken out of your pay, effectively reducing your taxable income. In addition, your earnings grow tax-deferred.1

Compounding growth

The sooner you start saving, the longer that tax-advantaged compounding can work for you. Small contributions made on a regular basis have the potential to grow to a sizable nest egg over time.

Dollar-cost averaging

Contributing to a retirement account regularly becomes the foundation of a good financial habit. Investing the same amount at regular intervals helps even out market fluctuations by buying more shares when prices are low and fewer shares when they are high.2 Known as dollar-cost averaging, this strategy can help reduce volatility in your portfolio.

Payroll deduction

Pay yourself first each month through automatic payroll deduction – it's easy and because you never see the money, you won't even miss it when managing other household expenses.

Matching contributions

Many employers match a percentage of each employee's contribution to their retirement plan. If your employer offers such a match, make sure you're contributing enough money to qualify for the full amount offered. After all, it is free money that you will not receive if you don't participate.

Investment options to meet your needs

Your employer-sponsored retirement plan offers a variety of investment choices, allowing you to choose an asset allocation that is in alignment with your financial goals, time horizon and risk tolerance. Your retirement plan administrator can explain the options to you and help you determine if you are on track to saving enough to meet your retirement goals.

Supercharge your savings

To make sure your retirement years are a priority, consider increasing your monthly contribution to your employer-sponsored retirement plan to the maximum allowed. For the 2015 tax year, you can contribute up to $17,500 if you are under 50 years old. Investors age 50 and older may be able to increase their savings even more through catch-up contributions to their employer-sponsored retirement plan (if offered in your plan). If you are at least 50 years old, you can contribute up to $24,000 to your plan. To increase your contributions, see your plan administrator.

1. In retirement, withdrawals will be taxed at ordinary income tax rates. Withdrawals made before age 59 1/2 (age 55 if you leave your employer) may be subject to a 10% penalty tax (does not apply to 457 plans).

2. A systematic investment program cannot guarantee a profit or protect against loss in a declining market. You should consider your ability to keep investing during periods of low price levels.