Saving for Retirement: Giving Yourself a Little Extra Cushion

March 4, 2013

 You’re probably aware of the increased media and political focus on public employee benefits that’s emerged in the last two to three years. Whether it’s the national attention on Wisconsin’s Governor Scott Walker in 2011, or the votes last year in San Diego and San Jose to cut pension benefits, the budget challenges of state and local governments following the 2008 financial meltdown have pushed public sector employee benefits into the spotlight.

As public employees, most of us already participate in a richer employer retirement plan than the majority of today’s private-sector workers. I’m grateful for that benefit, but I would be foolish to assume that it completely insulates me from the economic realities that continue to impact the rest of our country and the world.

Colorado’s retirement plan was actually one of the first in the nation to address the consequences of the 2008 market decline by making changes to plan benefits and contribution levels. Most state pension plans have since followed suit with decreased benefits for current and/or future plan participants.

So what’s an appropriate response to today’s heightened levels of economic uncertainty and volatility?

I’ve concluded that even as a public employee, I have to be more accountable for building a supplemental do-it-yourself retirement account than my parents’ generation needed to be. Thankfully, for me, public employees in Colorado have access to a variety of plans like this through their employers (401(k), 457, and/or 403(b) plans).

Yes it’s challenging to make decisions about contribution amounts and fund choices, but thanks to federal legislation, plans have more resources to assist individual investors. If you haven’t checked what your plan has available within the last couple of years, it’s worth another look.

Because so many private-sector employees have only a 401(k) plan and Social Security for retirement, the 401(k) has been an ongoing topic of discussion in both the academic journals and the blogosphere. I was struck by the results of a recent survey I saw online at SmartMoney’s blog about retirement, Encore. The commentary was based on a survey by one of the country’s largest benefits consulting firms, Towers Watson, which highlighted a new divide on the 401(k):

“Towers found about two-thirds — 65% — of employers believed employees had ‘adequate’ retirement and investment planning resources. At the same time only 15% thought employees “made good use” of the resources and only 22% thought employees made “informed decisions” about retirement.”

It’s clear from the above quote that employers believe they are providing the tools to help employees with the challenges of today’s retirement planning. Even though my 401(k) is not my primary retirement account, my plan has added many of those same resources, and I’m taking advantage of them to build an extra cushion for the bumps I may encounter ahead.

See some of the features in my 401(k) plan, which many of you may also be eligible to participate in --  10 Things You Might Not Know About Your PERAPlus 401(k)/457 Account

What extra steps are you taking to prepare for retirement? 

Other articles you may be interested in:
Retirement Planning: What to Do in Your 20s, 30s, 40s