Retirement Meditation #6: Should I make deferral contributions to capture the whole employer match?

Insights | Retirement Meditation #6: Should I make deferral contributions to capture the whole employer match?

Author: Paul A. Carl, CHSA, CPFAVice President, Retirement Plan Consulting, Registered Representative


After graduating from college, I joined the U.S. Department of Labor, EBSA (when it was PWBA). 

The government had just made the switch from the Civil Service Retirement System (CSRS), a defined benefit emphasized program, to Federal Employee Retirement System (FERS), which introduced a defined contribution plan to federal employees. The Federal Thrift Savings Plan (TSP) offered a match equal to 4% of compensation for eligible employees deferring at least 5%. I chose to contribute 5% to get the full match. 

Looking back, how stupid! Could I have afforded a greater deferral amount? Yes. Did I do something beneficial or constructive with the extra funds that I didn’t save towards retirement? Well…do baseball games and a few beers count?

Now, don’t get me wrong, maxing the employer match rate is fantastic! If you can afford to do so, do it! If you cannot afford to max the employer match rate, figure out a way to reconstruct your budget so you can max the employer match. Not maxing the employer match means that you are leaving money on the table…money your employer wants you to have. 

Many industry experts and financial planners often advise their clients to focus on saving at least 10% if not 15% of annual earnings. Shifting your focus to meeting or exceeding these percentages rather than just deferring enough to receive the employer match will set you up to enjoy a financially secure retirement. As I’ve mentioned in a previous Meditation, I’ve never met anyone who said they had saved too much for retirement!

Are you deferring enough?

 

The content of this blog is offered by HORAN Wealth Management, an SEC registered investment advisor. This information is not intended serve as legal advice or as a substitute for the advice of your own counsel and should not be relied upon as such, as the advice appropriate for you will be dependent upon the particular facts and circumstances of your situation. We provide links to other sites that we believe may be useful or informative. Any links to third-party sites, or information therein, are not intended as and should not be interpreted by you as constituting or implying our endorsement, sponsorship, or recommendation of the third-party information, products, or services found there. Neither the information nor any opinion expressed constitutes a solicitation to use our services or to purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Market conditions can vary widely over time and there is always the potential of losing money when investing in securities. HORAN and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

 

 

Business photo created by rawpixel.com - www.freepik.com