Full Version: Stop Me Before I Spend
Yea I agree you should try and make your savings automatic, not just retirement savings, but any kind of savings. I try and make transfers the monday after I get paid via direct deposit.
IMHO a retirement account should remain an opt-in, not opt-out. If employees are expected to follow the default option or miss the opt-out deadline, they may realize too late the 401k/IRA has been funded (and money cannot be withdrawn without a penalty).
Two cases where a 401k/IRA deduction could hurt the employee.
Often APRs on credit card debit that is past promo period exceed returns on the retirement portfolio. Some employers do not match 401k contributions. Absent an employer match, an employee drowning in high-interest debt may be better off putting disposable income towards paying down that debt before setting aside money for retirement. Especially if the employee is in a low tax bracket
If the employee anticipates tax bracket in retirement to be higher than current tax bracket, e.g. the employee is currently in a low-income bracket, a Roth 401k/IRA could be a better option.
Two cases where a 401k/IRA deduction could hurt the employee.
Often APRs on credit card debit that is past promo period exceed returns on the retirement portfolio. Some employers do not match 401k contributions. Absent an employer match, an employee drowning in high-interest debt may be better off putting disposable income towards paying down that debt before setting aside money for retirement. Especially if the employee is in a low tax bracket
If the employee anticipates tax bracket in retirement to be higher than current tax bracket, e.g. the employee is currently in a low-income bracket, a Roth 401k/IRA could be a better option.
QUOTE (nothingtolose @ Sep 8 2009, 05:01 PM) 
IMHO a retirement account should remain an opt-in, not opt-out. If employees are expected to follow the default option or miss the opt-out deadline, they may realize too late the 401k/IRA has been funded (and money cannot be withdrawn without a penalty).
Two cases where a 401k/IRA deduction could hurt the employee.
Often APRs on credit card debit that is past promo period exceed returns on the retirement portfolio. Some employers do not match 401k contributions. Absent an employer match, an employee drowning in high-interest debt may be better off putting disposable income towards paying down that debt before setting aside money for retirement. Especially if the employee is in a low tax bracket
If the employee anticipates tax bracket in retirement to be higher than current tax bracket, e.g. the employee is currently in a low-income bracket, a Roth 401k/IRA could be a better option.
Two cases where a 401k/IRA deduction could hurt the employee.
Often APRs on credit card debit that is past promo period exceed returns on the retirement portfolio. Some employers do not match 401k contributions. Absent an employer match, an employee drowning in high-interest debt may be better off putting disposable income towards paying down that debt before setting aside money for retirement. Especially if the employee is in a low tax bracket
If the employee anticipates tax bracket in retirement to be higher than current tax bracket, e.g. the employee is currently in a low-income bracket, a Roth 401k/IRA could be a better option.
IMHO retirement should not be put on hold to pay off consumer debt. there is a reason retirement accounts are generally safe in BK...
moreover, starting early is important (rule of 72 and all that) as well as getting a match if offered.
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