The retirement age is going up and the cost of retiring is going up too.

As many as three quarters of Americans do invest in their company sponsored 401(k) plans, but there are plenty of people who don’t. The problem is, most of those who don’t participate are in their 20’s and they’re the ones who would benefit most.

Why don’t all employees opt into their 401(K) plans?

According to Lori Lucas of Hewitt Associates, “People intend to participate in their 401(K) plan, but it takes awhile to get around to it.”

But taking your time could cost you down the road.

David Wray, 401(K) Profit Sharing Council of America says, “If a person saves for ten years, between the ages of 25 and 35, and stops, but keeps that money invested, they will have as much money when they’re 65 as a person who starts saving when they’re 35 and saves religiously for the next 30 years.”

If investing in a 401(K) is such a no brainer, then why have 30 percent of Americans opted out of their company sponsored plans?

According to Lori Lucas, “If you have a 25 year old thinking, I don’t have to worry about this until I’m 65, they have other priorities. Maybe they’re thinking in terms of paying off their college loan, buying a car, buying a house. Retirement is not their greatest priority at that age.

Those employees who do invest in their 401(K) generally leave their retirement funds on auto pilot.

Investors say you have to be more involved in investing to maximize your 401(K) benefits.

Lori says, “At least revisit your portfolio annually so that you can rebalance and determine if the mix is still appropriate for you.

Another problem according to Lori Lucas is that 401(K) plans tend to be overweighted with company stock. If more than 10 percent of your portfolio is in company stock, you’re taking a big risk.

“It’s still one stock and you’re really putting all your eggs in one basket.”

Even if you didn’t save in your 20’s, it’s not too late.

When you’re in your 40’s, you’ve got to suck it up. You’ve got to save more. This is very important. Do you want to be financially free when you’re 65 or don’t you?

Although the average 401(K) balance is now about $60,000, almost a quarter of Americans have only save $5,000 in their 401(K) accounts.

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Copyright 2004, WGN-TV

June 3, 2004