This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Our 401(k)s Show We're Not Taking Investor Confidence Seriously

NEW YORK ( BankingMyWay) -- U.S. investors are bullish on the stock market, but not enough are putting the cash into their 401(k) accounts to show it -- and to gain full advantage.

That's a shame, as even a 1% hike in your monthly 401(k) savings plan can add up to $330 per month in your retiree "paycheck" down the road.

This figures come from Fidelity Investments, which is chiding Americans these days about not saving enough for retirement even though eight out of 10 investors believe the Standard & Poor's 500 Index will rise by more than 100 points by the end of the year.

There is some progress for Americans with their retirement savings. According to Fidelity, 401(k) plan balances rose 11% from the third quarter or 2012 to the third quarter of this year to a nationwide average of $80,600. And if you have been working for a company that offered 401(k) plans for the past 10 years, that average balance number leaps to $211,800 -- up 19% from a year ago.

But in the latest in a series of quarterly reports from Fidelity on U.S. workers and their 401(k) plans, company analysts say Americans are costing themselves income in retirement by being stingy on their retirement plan contributions now.

"While it's a good sign that some workers are increasing their savings for retirement, many younger workers -- especially Millennials -- aren't saving at the recommended 10% to 15% of their income," says James MacDonald, president of workplace investing at Fidelity. "It is critical young workers realize that even the smallest increase to their monthly savings today or just 1% -- whether in a 401(k) or an IRA -- could have a meaningful impact on their retirement paycheck down the road."

Here is how that translates into real dollars:

Say you're 25 and have a salary of $40,000, and you added just $33 per month to your 401(k), with an assumed average annual rate of return of 7%. Fidelity says you could add $330 (in pretax income) to your monthly paycheck in retirement by doing so. Even if you scaled back to an average annual rate of return of 5.5%, a 1% uptick in savings translates into an extra $200 every month in retirement.

If you're 35 and make $60,000 annually, and you add $50 to your monthly 401(k) contribution, an average 7% annual rate of return will yield an additional $270 every month after you turn 65, or an extra $180 at a 5.5% annual rate of return.

Those are real dollars, and they really add up during your golden years. But that only holds true if you play the game right and start contributing that extra 1% every month, Fidelity says.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,416.85 +225.48 1.31%
S&P 500 2,021.25 +19.09 0.95%
NASDAQ 4,683.4070 +45.4130 0.98%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs