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New Trends Retirement Planning

New Trends Retirement Planning - Indeed, unstable stock market conditions in recent years have not only motivated legislators to fix some of the flaws in the system, but also inspired plan sponsors (meaning employers) to create better tools to help their workers meet long-term savings goals.

"There's been a philosophical shift going on for several years from a 'if you build it they will come' mentality to a more paternalistic approach to offering (retirement) plans," says David Wray, president of the Profit Sharing/401k Council of America in Chicago. "After 2002, participants in 401(k) plans, who once believed they could outperform the market on their own, started looking for help. Employers are now coming up with solutions and you see that in a lot of the automated features now available."

New Trends Retirement Planning

Take automatic enrollment, for instance. This program enables employees to automatically enroll in their company's 401(k) -- unless they elect otherwise.

Their take-home pay is reduced by a certain percentage -- generally 3 percent -- which is contributed to the 401(k) plan, though the employee can elect to save more.

Contributions are made on a pretax basis, invested in a manner designed by the plan, and nothing is taxed until distributions are taken.

Some employers are also using the auto escalation feature, which gradually increases their workers' contribution every year.

New Trends Retirement Planning


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