ATLANTA - Sept. 8 is 401k Day. And it's not a coincidence that it comes just behind Labor Day. It’s a celebration of working that leads to awareness of retirement.
401k Day is about educating yourself about retirement, so let’s start with a few bits of knowledge to get started.
You can start receiving some of your social security benefits at age 62. Full retirement is age 67. In a recent study from Bank of America, the average woman’s 401k balance is $59,000. For men, it’s $89,000. And recent federal data shows that 75 percent of us who haven’t retired just yet have saved something toward retirement.
So 401k Day is a good time to check in with a financial advisor about financial literacy. Tammy Trenta is CEO and founder of Family Financial. And, like many of us, she has a story that led her to retirement savings.
"When I graduated from college and sat in on a 401k meeting that my company provided, and I was thinking to myself, this is a terrible deal. I can't touch it until I'm 60? I need that money now," she laughed.
Then she watched older family members fall on some really hard financial times. Watching how hard it was for this older couple to catch up on retirement savings was a real eye-opener. She lays out why it’s important to start as early as you can even if you have little to save.
"There's a pretty compelling statistic that for every five years you delay saving you have to double up your savings to make that same target. So, if you want to have a million dollars by the time you're 50, let's say if you're saving $250 a month, and you wait five years, now you gotta put $500 a month in."
There are multiple ways to save. A 401k originates from an employer and often your company contributes to this. If you don’t have that option, you can open a traditional IRA which gives you pre-tax contributions, but you pay your taxes when you withdraw in retirement. A Roth IRA flips that — no tax deduction on the front end. But, you are not taxed when you withdraw.
She told us, "It's much easier to start early because it's manageable amount. Over time, it becomes less manageable and could potentially create a bigger financial burden.