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Gas tank wins over retirement savings

Michelle Hicks

Michelle Hicks

Idaho gas prices were up another $0.06 gallon the last week of March, according to AAA of Idaho. “Investors have been reacting to volatility including war, natural disasters, Japan’s nuclear problems, and the European debt crisis,” said AAA Idaho spokesman Dave Carlson.

When considering whether to put extra dollars into their gas tank or into their 401(k), many individuals and families think they don’t have a choice. The gas tank usually wins.

With almost all of the economic indicators demonstrating a rise in the cost of living, the long-term negative impacts on retirement savings are rising, too. That’s why now, more than ever, it is important for employers to help their employees keep retirement interests top of mind and help them consider what they can do now, even when budgets are tight, to build financial security for the future.

Reminding employees of the relatively small impact on take-home pay, when setting aside pre-tax dollars into a 401(k), can be eye-opening. It’s easy for employers to do. A simple communication campaign that shows actual dollar and cent examples is all people really need to see the long-term benefits.

For example, there are many cost-effective communication vehicles that can be used in this kind of campaign. A company can send home bulk-rate postcards or hang posters in a break room. Neither option incurs a huge expense.

The content can also come together easily. One idea is to demonstrate the advantages of using pre-tax dollars to save with an example. Say someone earns $2,000 a month and wants to put $200 into a 401(k) account each month:

In the 28 percent tax bracket the take-home pay is $1,440 after taxes ($2,000-$560 in taxes).

Removing $200 pre-tax means the person is only taxed on $1,880 dollars, with take-home pay after taxes now being $1,296 ($1,880-$504 in taxes).

The result is that it only costs $144 to set $200 aside in a 401(k).

The message could also include calls to action with simple instructions for how to increase 401(k) contributions. And, the message could remind employees to review their saving allocations to make sure they continue to meet their financial goals when the economy is in decline.

What does the employer gain from this kind of campaign? Retirement savings communication is a win-win for employers and their employees. The cost is minimal and the impact accumulates in two ways, both over time. Such actions from management build employee trust and the accrual of investments gives employees peace of mind for a sound financial future.

Michelle Hicks is a communications consultant with Buck Consultants. Contact her at michelle.hicks@buckconsultants.com.

About Michelle Hicks


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  4. Gas prices are KILLING me! I am reading a book now called “Aging Gracefully: Ideas to Improve Retirement Security in America.” It’s a collection of essays (one by Peter Orszag (orszagsite.com)- special assistant to the president for economic policy during the Clinton administration) that gives ideas for promoting greater retirement savings among Americans. It has some great suggestions! But like you said, the money has to be there (and not going to other things like GAS), to save it!