It’s Never Been Easier to Save for RetirementTrevor Gerszt
Most Americans understand that saving for retirement is important. Over the past several years, increased amounts of education and understanding have helped Americans save up more and more money for retirement. Total retirements assets have risen from $11.6 trillion in 2000 to nearly $27 trillion today. Thanks to the increased focus on the importance of retirement savings, the increased array of retirement savings options, and new techniques and strategies for investment, it has never been easier to save for retirement.
401(k) Plans and the Emergence of Nudging
Economist Richard Thaler recently won the Nobel Prize in economics for his work in behavioral economics. One of the concepts which he is most well-known for promoting is that of nudging, getting people to engage in behavior or make choices which they otherwise wouldn’t. Saving for retirement is one of those areas where nudging is increasingly in vogue.
One of the easiest and best-known ways to save money for retirement is through a 401(k) plan. Investing in a 401(k) is as simple as determining what percentage of your salary you want to go towards the plan and then determining what funds in that plan you want the money to go towards.
While only 14 percent of American companies offer their workers a 401(k) plan, most of those are larger companies that employ a lot of people. That means that nearly 80 percent of Americans work at a company that offers a 401(k) plan. Even better, many companies offer an employer match up to a certain percentage. That means that the employer will contribute money to the employee’s retirement plan up to a certain amount, normally around 3-5%.
That’s free money that can in some cases double the amount of money that employees are saving, yet many employees don’t take advantage of it. Current estimates indicate that only about 41 percent of workers whose employers offer a 401(k) plan actually make contributions to it. That’s why more and more employers are undertaking “nudging” and automatically signing up their employees to contribute to a 401(k) plan.
Most 401(k) plans have required employees to opt in. But more and more companies are signing up their employees automatically and requiring them to opt out if they don’t want to have a portion of their paycheck automatically diverted to savings. Studies indicate that people are much more likely to save for retirement when they are required to opt out rather than opt-in.
And with 401(k) plans increasing offering a greater diversity of investment options, as well as lower costs than traditional brokerages, they are increasingly becoming an attractive investment vehicle. Some employers even offer Roth 401(k) plans, a newer type of 401(k) that doesn’t allow you to use pre-tax dollars, but then allows you to take your distributions tax-free once you reach age 59½. But 401(k) plans aren’t the only investment option.
Individual Retirement Accounts
IRAs actually predate 401(k)s by a few years. Conventional IRAs offer the same benefits as 401(k)s in that they can be funded with pre-tax dollars. Roth IRAs are similar to Roth 401(k)s in that they are funded with post-tax dollars and then are not taxed when it comes time to make or take a distribution.
Unlike 401(k) plans, however, maximum annual contribution limits to IRAs are much more limited, and fewer employers offer IRAs than 401(k) accounts. Still, because IRAs often offer a wider assortment of investment options, they remain a popular choice for many investors.
Many people don’t know it, but they’re not limited to investing just in financial assets with an IRA. The list of assets that you can’t invest in with an IRA is actually pretty small. Anything that isn’t forbidden is allowed, which lets many Americans diversify their portfolios in ways they couldn’t even dream of when IRAs and 401(k)s were first introduced, through the development of self-directed IRAs.
That has allowed thousands of Americans to invest their retirement savings in gold. With a gold IRA, investors gain all the benefits of investing in gold along with the benefits of an IRA. They can still use the same pre-tax money they invested in their traditional IRA and roll it over into a gold IRA.
For centuries gold has served as a safe haven and store of wealth, and it continues to perform that role today. When financial markets crash, gold maintains and even gains in value. Ever since the US government severed the dollar’s last link to gold in 1971, gold has turned out to be a better long-term investment asset than stocks, and it’s not susceptible to the same market volatility as stocks, bonds, and other commodities.
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There has never been an easier time to save for retirement than today. Nor has there ever been an easier time to invest part of your retirement savings in gold. You owe it to your future retired self to make sure that you’re doing everything you can today to ensure yourself the best and most secure retirement possible.