The Union is pleased that so many of our shops have included the 401(k) in their collective bargaining agreements and that many members within those participating shops are contributing a portion of their salary, on a tax deferred basis, into their 401(k) account. Time flies, and the day will come when it is time for us to retire. The steps that are taken now can have a major effect on how we spend our retirement, or whether we can afford to retire.
In the months that follow, we will be including articles on the website and in the newsletter in an effort to explain the benefits of a 401(k) plan, provide articles about what one should consider in preparing for retirement and what one should expect in retirement. We will also attempt to keep you up to date on what is going on with the finances of Social Security and any action taken by Washington to financially strengthen the Social Security system.
How Can You Participate in the IUJAT 401(k) Rertirement Plan?
- In order for you to be able to participate in the IUJAT 401(k) Retirement Plan, you should:
- Discuss participation with the other members within your shop;
- Once you know the members are interested in participating, contact your Business Agent (BA) informing him that you would like your shop to be able to participate in the Plan;
- Your BA will negotiate with your Employer to amend your collective bargaining agreement to include the participation of the members in the Plan.
Why Should You Participate In The IUJAT 401(K) Plan?
If retirement planning is a race, a smart approach to help you get to the finish line is generally not sprinting—but rather starting at a smart, steady pace and not slowing down. There’s a huge benefit to investing early and sticking with it. You can really see the snowball effect of investing over time. There are two primary reasons behind the snowball effect: the power of compounding and an investing principle known as dollar-cost averaging. Here’s how they work:
The Power of Compounding
- You have the potential to earn returns on your returns. Compounding is the ability for investment returns to earn potential returns of their own. So over time you can make money not only on your original investment, but also on your accumulated gains from earlier years. Generally, the longer you hold your money in the account, the greater the potential your assets have to grow.
- The effect can be dramatic. Over time you let the power of potential compound earnings work for you. The more you contribute, the more these savings may perform for you. A few dollars a week now may make tens of thousands of dollars of difference in retirement.
- An example: The chart below shows the potential impact a small increase in contributions to the plan could have on retirement savings for a worker with a $35,000 salary.
- You’ll be glad you started early. One-third of employees surveyed in The Principal Well-Being IndexSM for the second quarter of 2010 said not starting retirement saving early enough was an impediment to their financial goals. Many have taken the lesson to heart: One in five has boosted retirement saving since the recession began in 2008.
Slow and steady investing may help offset volatility of the market. If you repeatedly invest the same dollar amount, the idea is that you’ll buy fewer shares when prices are high and more shares when prices are low—and your average cost will land somewhere in the middle.
It’s easy. By participating in the IUJAT 401(k) plan you are taking advantage of dollar-cost averaging automatically. Systematic contributions are being made to the retirement plan without you having to remember to invest.
You’ll develop the habit of saving. Even if you start small, setting aside something with every paycheck will build a lifelong saving routine.