Most Americans look forward to retirement: a time when they can spend more time doing what they want, instead of punching a clock or worrying over the day-to-day needs of a business. Sadly, though, not all Americans are actually saving enough during their working years to fund the kind of retirement they’re dreaming about.

Here’s another statistic that’s kind of disappointing: 79% of Americans work for a company that sponsors a 401K plan, designed to help them save more for retirement, but only 41% actually take advantage of this important benefit. Clearly, more of us need to not only be dreaming about retirement, but actually doing something about it.

In 1996, the Profit Sharing Council of America, which is now known as the Plan Sponsor Council of America (PSCA), designated the Friday after Labor Day (September 10, this year) as 401K Day, so employees could “start the week with Labor Day and end the week with retirement.” The idea is to promote 401Ks and encourage companies to provide more information to their employees, who in turn are encouraged to start taking their retirement planning and saving more seriously. This seems like a pretty timely notion: less than 40% of Americans who are currently in a 401K plan can answer even the most basic questions about 401Ks and how they can help to fund a comfortable and satisfying retirement.

If your company offers a 401K plan and you’re not enrolled, you’re missing a golden opportunity. And if you’re self-employed, you can start a 401K plan for yourself and your employees, with a little help from a financial institution. It’s a great way to attract and retain highly motivated employees—not to mention the benefits it offers for funding retirement and other important financial goals.

Whether your plan is a traditional 401k—where contributions are non-taxable and grow tax-deferred until your mandatory withdrawal age—or a Roth plan—where you pay taxes on the contributions now, but they grow tax-free and provide non-taxable income in retirement—a 401K is one of the best tools ever devised for funding retirement.

Each year, the IRS establishes limits for how much you can put into your 401K, and these are significantly higher than the limits for IRA contributions. You can learn more about the limits here. Also, if you work in the public sector, such as public education or for another tax-exempt organization, your 401K alternative is a 403B plan, which works similarly to a 401K. Most plans offer a number of different investment options, which can include stocks, bonds, and mutual funds, and your plan will usually allow you to designate which areas and what percentage of your contributions the plan should invest in. Some plans offer a matching percentage from the plan sponsor, which leverages your savings even more, and you’ll also have a vesting schedule, which is the amount of time you’ll need to stay with your employer before the funds in your account can be withdrawn or rolled over to another tax-favored account.

I work with investors and others preparing for retirement to design smart, individualized strategies that can help to provide for a secure, satisfying retirement lifestyle. Most critically, I am a fiduciary, which means that I am legal and ethically obligated to provide advice and recommendations that place my clients’ best interests before everything else. Click here to download my report, “The Fiduciary Standard and the Individual Investor.”

Stay Diversified, Stay YOUR Course!

Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.

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