National 401(k) Day is Sept. 5!

National 401(k) Day is observed annually on the Friday following Labor Day, symbolizing the transition from labor to retirement. 

On National 401(k) Day, the Tennessee Department of Commerce & Insurance’s Securities Division reminds Tennessee investors to check in on their nest eggs today and learn more about how important 401 (k) retirement savings plans can be to your future. 

Unfortunately, most Americans say they are financially unprepared for retirement. Today, we’re encouraging Tennesseans to understand what can be done now to make retirement a reality one day.  

A key first step to retiring is participating in your company’s 401(k) program. Here are some easy-to-remember tips to get you started on saving today. 

• What’s a 401 (k) plan? A 401(k) plan is an employer-sponsored retirement savings plan that allows employees to contribute a portion of their pre-tax wages to an individual account for retirement. These plans enable workers to leverage tax advantages on the money they save for retirement, in addition to often including employer matches of a percentage of the money workers put into their 401(k) retirement savings accounts. Over time, these automatic deposits add up. $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.
• A 401(k) is a long-term investment strategy. Most 401(k) plans allow participants to put their set-aside savings into a range of investment options, typically mutual funds such as index funds, large- and small-cap funds, foreign funds, real estate funds, and bond funds. The mix of fund options available will usually range from conservative, income-oriented funds to aggressive, growth-focused funds. Investors should consider things like their anticipated time to retirement, personal investment objectives, and risk tolerance — then make a plan and stick to it, giving the investments time to grow.
• Your 401(k) contributions could qualify you for a tax credit or tax benefits. A tax credit called the Retirement Savings Contributions Credit is available to low- and moderate-income taxpayers and is in addition to the tax deduction for a traditional 401(k). Among the top tax benefits of a 401(k) is that money is put into the retirement account on a pre-tax basis, lowering the account holder’s taxable income for the year of the contribution. A 401(k)’s earnings also accrue on a tax-deferred basis, meaning that any dividends or capital gains the account’s investments produce are not subject to taxes until the funds are withdrawn. 
• Know the fees you’re paying on your 401(k). Nearly all 401(k) plans involve fees and charges — which can vary greatly and can sometimes be somewhat hidden (or at least a challenge for account holders to nail down/evaluate). These 401(k) plan fees typically range from 0.5% to 2%, with the variations commonly linked to factors such as the provider, the size of the plan, and the number of plan participants. Review your plan materials and statements from time to time to gain a better understanding of what you’re being charged. While you can’t do much to avoid the fees, you can choose funds with lower fees to reduce the overall impact on your earnings.

Questions about a retirement plan? Tennessee consumers can contact TDCI’s Securities team by phone at (615) 741-2947 or 800-863-9117 (Toll Free) or by email at securities.1@tn.gov.

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