Over the Labor Day weekend, President Obama unveiled a new set of initiatives to make saving for retirement easier, including automatically enrolling workers in 401(k) and Simple-IRA plans, reports the Washington Post.
“The fact is, even before this recession hit, the savings rate was essentially zero, while borrowing had risen and credit card debt had increased,” said Obama in his weekly radio address, available on YouTube.
“Many were simply struggling to stay afloat as incomes were stagnant — or falling — and jobs were scarce.”
Action has already taken place. According to U.S. News and World Report:
The IRS recently issued pre-approved automatic enrollment language that employers can use to amend their retirement plans. Plan administrators may also automatically increase the default amount their workers save each year. Employees must be given at least 30 days notice specifying the percentage of their salary that will be withheld from each paycheck and how that money will be invested. Workers will also be informed about how to opt out of the plan, save a different amount, or choose different investments at least once a year. Employers without 401(k) plans may automatically enroll workers in a SIMPLE-IRA and employees may opt out.
While I love any way to automate your finances, something feels a bit different about being automatically enrolled in a plan at work. Maybe it’s just me, though.
So, I want to know: is automatic retirement enrollment necessary?
Answer the poll below and then let me know why in a comment below.
[poll id=”20″]
{ 1 comment… read it below or add one }
I don’t think it’s necessary, but at the same token, it can be a very good idea for some. If the automatic deduction comes off your paycheck before you even see it, that kind of enforced financial discipline can be a positive force, and more so if an employee contributes to a separate fund on top of that as part of their financial planning.