20 • MARTIN H. RUBY
Employer contributions have fallen across the country, with many employers contributing less or not at all. Today, few employers are matching at meaningful rates. 1 In fact, 82 percent of Americans have either no 401(k), a 401(k) with no match or a 401(k) with a match less than three percent. 2 Put another way, only 18 percent of Americans have the old standard of meaningful participation by their employer. This is why the employer leg of your retirement savings stool is probably less stable for you than it was for the generations be- fore you. How You Save Today The two most common ways to save for retirement today are 401(k)s and IRAs, and their Roth counterparts. This is what most American workers rely on to build the employer leg of their stool. As we’re about to see, both have some significant shortcomings when it comes to creating a strong base for your retirement. Let’s look at the non-Roth version first. Your account may be called an SEP (simplified employee pension), an IRA or a 401(k). Whatever it’s called, it’s likely struc- tured the same way. Here are the basics: • 401(k)s are tax-deferred savings vehicles. Tax-deferred means you deduct your contributions from your taxable income in the year you make your contributions. If you make $100 a year and contribute $10 to a 401(k), the IRS bases your taxes on $90 of income rather than the full $100. 1 Brian O’Connell. The Street. May 02, 2013. “More U.S. Firms Shutter 401(k)s, Match- ing Programs.” http: // www.thestreet.com / story / 11911313 / 1 / more-us-firms-shutter- 401ks-matching-programs.html. 2 Emily Brandon. U.S. News and World Report. July 1, 2013. “How to Tell if You Have a Lousy 401(k) Plan.” http: // money.usnews.com / money / retirement / arti- cles / 2013 / 07 / 01 / how-to-tell-if-you-have-a-lousy-401k-plan.
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