In a recent survey, 63% of Americans said they’re confused by their 401(k).
And we understand. Anytime you start mixing numbers and letters, it can be confusing. Throw in a few parentheses and the confusion just multiplies. But to avoid becoming part of the statistic, we’re answering some common questions about 401(k) plans.
What is a 401(k)?
A 401(k) is a retirement plan that allows you to set aside money from your pay for long-term savings and investment. Basically, you have the money taken out of your pay, and it goes into an investment account in your name, where it can grow for your future. Each quarter, you receive an account statement showing you how much you’ve saved in your 401(k) and any earnings on your savings.
At Publix, we offer our associates the 401(k) SMART Plan. You’re eligible to participate in the SMART plan if you’re at least age 18 and have been employed with Publix for at least six months.
Why not just save the money in my bank account?
Well, there are three really good reasons:
- Contributions are made pre-tax. This means the money taken from your pay lowers the amount of income taxes you may owe. So, the more you contribute to your 401(k), the more you reduce your taxable income for the year and the less taxes you pay. You only pay taxes on the money in your 401(k) when you take the money out of your 401(k) account.
- The risk of spending your savings is minimal. Since the money is automatically deducted from your pay and invested in your 401(k) account, you won’t run the risk of spending it.
- You get free money. OK, well it’s not really “free,” but it kind of is. For every dollar you save in the SMART plan, up to 3% of your eligible pay, Publix contributes 50 cents to your account — up to $750 a year. You’re eligible for this matching contribution if you work 1,000 hours in your anniversary year, so doing the math, that’s about 20 hours each week.
When should I start saving for retirement?
This is where most people get confused. You may not believe you’re old enough to start thinking about retiring or even have plans to retire anytime soon, but today is actually the perfect time to start. The sooner you start, the more you could have.
Even if you’re not contributing to a 401(k), now is a good time to visit the SMART plan website and use the myOrangeMoney tool. This tool allows you to input your personal information to better understand your retirement goals and readiness — and the good news is, it’s simple to use. After logging in to the SMART plan website, your current retirement savings, including your PROFIT Plan balance if you have one, is available in the myOrangeMoney tool.
