We all dream of a life of leisure during our golden, retirement years. National 401(k) Day, celebrated every year on the Friday after Labor Day, prompts us to check in on our nest egg. With only 70% of Americans financially prepared for retirement, understanding what you can do to make the dream of retirement a reality is important. It is estimated that 79% of Americans work for a company that offers a 401(k) plan; however, only 41% take advantage of the benefit. Don’t let another day go by without learning why you should save for retirement through your company’s 401(k) plan or what you can do to save for retirement if you don’t have access to a 401(k).
History of National 401(k) Day
National 401(k) Day began in 1996 by the Profit Sharing/401(k) Council of America (PSCA), known today as the Plan Sponsor Council of America. The Friday following Labor Day (Monday) was chosen so employees can “start the week with Labor Day and end the week with Retirement”.
This holiday promotes retirement savings education and PSCA encourages companies to give their employees the 411 about their 401(K) in fun, easy-to-understand ways. Retirement planning is a complex topic – rules change as quickly as the market changes. Less than 40% of Americans can answer basic questions about their 401(K) so it’s a good thing we have a holiday dedicated to learning about them.
Because of this complexity and our increased focus on financial health and wellness over the years, many companies now campaign for retirement savings education year-round. And, now more than ever, retirement savings education isn’t only about 401(k) plans. Since not everyone has access to them and people prefer investment diversification, we aren’t putting all of our nest eggs in one 401(k) basket.
If your employer provides a 401 (k) plan, you can use that resource to start your retirement plan. However, if you’re self-employed, you can start your 401 (k) through a financial institution. There are two different types of 401 (k) – traditional and Roth. The traditional route takes a percentage of your paycheck – approved by you, of course – whereas through the Roth 401 (k), contributions are made with money you’ve already paid on taxes, meaning your money grows tax-free.