Retirement Meditation #6: Should I make deferral contributions to capture the whole employer match?

Insights | Retirement Meditation #6: Should I make deferral contributions to capture the whole employer match?

Author: Paul A. Carl, CHSA, CPFAVice President, Retirement Plan Consulting, Registered Representative

After graduating from college, I joined the U.S. Department of Labor, EBSA (when it was PWBA). 

The government had just made the switch from the Civil Service Retirement System (CSRS), a defined benefit emphasized program, to Federal Employee Retirement System (FERS), which introduced a defined contribution plan to federal employees. The Federal Thrift Savings Plan (TSP) offered a match equal to 4% of compensation for eligible employees deferring at least 5%. I chose to contribute 5% to get the full match. 

Looking back, how stupid! Could I have afforded a greater deferral amount? Yes. Did I do something beneficial or constructive with the extra funds that I didn’t save towards retirement? Well…do baseball games and a few beers count?

Now, don’t get me wrong, maxing the employer match rate is fantastic! If you can afford to do so, do it! If you cannot afford to max the employer match rate, figure out a way to reconstruct your budget so you can max the employer match. Not maxing the employer match means that you are leaving money on the table…money your employer wants you to have. 

Many industry experts and financial planners often advise their clients to focus on saving at least 10% if not 15% of annual earnings. Shifting your focus to meeting or exceeding these percentages rather than just deferring enough to receive the employer match will set you up to enjoy a financially secure retirement. As I’ve mentioned in a previous Meditation, I’ve never met anyone who said they had saved too much for retirement!

Are you deferring enough?


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