Football season may be over but a Legg Mason retirement council is still advising employees, especially younger ones, to implement a "first and ten" strategy to position themselves for a healthy retirement.
The Legg Mason Retirement Advisory Council based in Baltimore, Md., and Harrison, N.Y., is urging the federal government to encourage all employers to implement tax-deferred policies for employees' retirement savings.
First, start saving, and then put away 10% of salary a year, advises The Savings Crisis of Working Americans: the Retirement Industry Call to Action, a white paper prepared by Legg Mason. The report calculates a 25-year-old making $30,000 who puts away 10% of salary in a tax-deferred plan will have $1.2 million at age 67. It calculates a 3% salary raise a year.
In a non-tax deferred plan not partially matched by the employer the amount would be $604,814, the report says.
"The power of employer matching contributions and tax-deferred compounding can't be emphasized enough," says Joseph J. Masterson, senior vice president of Diversified, a national firm specializing in retirement plans and a founding member of Legg Mason.
The retirement industry, employers, working Americans, financial intermediaries and the government have to work together to develop solutions that improve the savings rate.
"Solving the retirement savings crisis has to be a team effort," including financial advisors, says Gary Kleinschimdt, Legg Mason head of retirement. "All key stakeholders must commit to working together to develop new solutions that enhance financial literacy and retirement savings of American workers."
"Financial intermediaries must serve as an advocate for their clients by working closely with plan sponsors to promote transparency and enhance their knowledge and abilities," the white paper says, even to the point of "over-communicating the importance of saving more to prepare for retirement."
-Karen DeMasters