Resolve Amid the Financial Adversity

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More than 60 percent of Americans who participate in their 401(k) retirement plans at work are adding more dollars to their debts than they’re socking away in those plans, according to HelloWallet’s analysis of recent federal data.

This shocking statistic suggests the need for some serious financial planning.  Yet the vast majority of people in a recent survey said making a financial plan would not be among their 2014 resolutions.

Why not?  Many said they “don’t make enough money to worry about” a financial plan, according to Allianz Life Insurance Company, which conducts the survey.

Okay.  But if you feel unable or unwilling to write up a full-blown plan, perhaps you’ll consider one small step:

To nudge people to save more, some companies are automatically increasing their employees’ 401(k) contributions every year.  There’s no reason you can’t take the initiative yourself and start contributing to a 401(k) or IRA or raise your current contribution by 1 percent or 2 percent.

Yes, this will take money out of your pocket.  But remember that a one dollar contribution doesn’t feel like a dollar lost, since contributions are deducted from your pre-tax salary or wages.  It’ll feel more like 75 cents or 85 cents, depending on your tax bracket.

And depending on how old you are and how you invest, that dollar could mean many more dollars in savings when you retire.

A little more from your paycheck can translate into greater financial security in the future.

Ken Pidcock

One suspects that employers aren’t providing “better holistic financial guidance” because they don’t care to remind employees what a lousy deal a 401(k) account is compared to an actual pension plan. Better to just let personal finance pundits excoriate them for not saving enough. (I don’t count the principals of CRR among said pundits, by the way.)


Those who said, “they don’t make enough to worry about it,” are the ones who most should save in tax-deferred accounts. Depending on their tax bracket, it not only can feel like as little as 85 cents per dollar saved, but there’s also the potential tax credit (saver’s credit) so that they may get back up to an amount that’s equivalent to 35 cents per dollar saved. If there is any type of company match then they’ve made out like bandits for what little they saved.

Brian Hoshowski

Thank you so much for the useful financial planning tips. It’s always good to have an expert’s opinion.

Kim Blanton

Brian and Ken – thank you for your comments.
And Al, I’d actually never heard of the saver’s credit and just might have to write a blog about it!
Kim (blog writer)


What kind of debt was being added — was it housing debt, new vehicles, education debt — or was it simply consumer debt for basic necessities, which would point to a far worse problem. I’d like to see more analysis of the data.

Also, thank you, Ken, for your comments. You’ve made me think how I stopped contributing to the company 401k when I discovered the expense ratio for a simple large cap index fund had me paying $16.60 per $1,000 per year. That expense ratio is still buried in the data, and not listed as ‘fee’ on the cover page financial statement. I find this egregious, and it makes me distrustful of the 401k system.

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