The retirement savings shortfall in America is staggering: The typical working-age family has only a few thousand dollars saved for retirement, and four out of five working families have retirement savings that amount to less than their annual income. That's far less than amount most people will need to adequately fund their retirement years.
But saving doesn't have to be overwhelming. The solution: compound interest paired with systematic savings in cost-efficient investments.
Consider a 30-year-old employee who makes $40,000 annually. If they start contributing as little as 1% of their salary to their 401(k) plan, assuming a 7% rate of return, their account will be worth $55,295 in 35 years. Now, consider the same employee, investing the same 1% of their pay into mutual funds that net 1% less in fees, thus earning them an 8% rate of return. That same investment would yield $68,926 in 35 years—a 25% increase, all thanks to lower investment costs.
What does this mean? A 1% reduction in fees makes a big difference! Lower investment costs translate into less erosion of fund returns—and better retirement savings outcomes.
Convincing employees to start investing is only half of the battle. The next step is providing them with a well-structured retirement plan and low-cost investment options. Long-term investing in cost-efficient funds in a properly structured plan is the key to successful retirement account building.
Whether your agency already has a plan or is interested in starting one, we'd be happy to talk to you about the new Big "I" MEP 401(k) Plan and provide a cost comparison. Take advantage of your Big "I" membership by contacting Christine Muñoz or Big "I" Retirement Services at 800-848-4401. We're here to help!