Is bigger always better? Do good things really come in small packages?
Ah. The age-old questions.
Let me tell you that when it comes to your Defined Contribution Plan, bigger is not only better, but preferred.
GETTING IT BIGGER AND MAKING YOUR RETIREMENT MORE SATISFYING
Now, lots of people have reasons for not managing their money. Some are legit, but most are …………. Well, we’ve already covered that territory previously. Several times. So, we’re not going to go there. No judgement.
Conversely, if this describes you, we will just leave it at this; If you are unwilling to perform certain tasks or duties for you and your family’s financial future, we invite you to find out what engagement looks like for you.
Ok. One judgement.
Anyway, making your retirement more satisfying typically involves reducing any monetary concerns. In order to do that, one must be engaged. Being engaged builds confidence and we all know that being confident in your financial future is sexy.
DOING NOTHING IS THE WORST CHOICE YOU CAN MAKE
Betcha think that I am going to talk about the 364 participants who have not bothered to secure their Defined Contribution account at Empower.
Nope!
What we are talking about is learning about the features of your Defined Contribution Plan. For instance, did you know that since 2019 participants could make contributions to the voluntary portion of their Defined Contribution Plan? Or, since 2024, participants can contribute into the Plan’s Roth 401(k) feature?
By the way, in the past, no-one could make contributions to this account. As a matter of fact, the participants retiring today retire with high six-figure and lower seven-figure balances in their account, DESPITE the fact that they were not afforded the opportunity to contribute themselves for the preponderance of their working careers. And let’s not forget the per hour contribution rate that the employer makes on their behalf when they first started was a lot lower than it is today.
Can you imagine what those balances would be if the participants were able to make contributions? Imagine if they started making contributions earlier in their career or if those earnings were tax free? As stated directly above, you can now do both. But that is up to you.
I know, I know. Reading up on the benefits is a drag. Am I right? Regardless, I can assure you that given enough time, even the mundane can appear marvelous.
What do I mean by that? Let me show you:
| Engaged Participant A | Unengaged Participant B | |
|---|---|---|
| When beginning to invest, the person is: | 25 Years Old | 35 Years Old |
| Each person invests $100 a month for….. | 10 Years | 30 Years |
| With an 8 percent rate of return, at age 65, their accounts are worth…… | $200,061 | $149,036 (Even though Participant B invested for three times as long he/she is behind by $51k!) |
If you are at all interested in your retirement future, the chart above should muster significant enthusiasm.
If that does not excite you, you could always ask any retiree if they had the chance to go back in time, and were allowed to make small and consistent contributions into their Defined Contribution Plan (aka, MPP&T or the Annuity Fund) like you all do now, would they? Ask them how much more secure they would feel about their retirement financial future if they did and if the small modicum of money, they diverted weekly or monthly into the Voluntary or Roth provision of the Plan would have changed their lifestyle one iota?