Autopilot 401(k) boosts savings

Want an easy way to save more for retirement? Let someone else do it for you.

Like many Americas, Amy Sadaune, vice president of human resources for First Community Credit Union in Houston, has her employer deposit a portion of her income into a 401(k) plan. But she also takes advantage of the credit union's new Step Ahead program to boost her contribution by one percentage point a year — automatically — until she hits the legal maximum (it's $14,000 this year for people under age 50, an amount that will continue to rise).

"I don't have to think about it," says Sadaune, 37, who hopes to retire in about 20 years.

Programs like Step Ahead, offered by Principal Financial, help employees overcome the twin nemeses of retirement saving: inertia and procrastination. Unlike traditional 401(k) plans, which rely on workers to make their own decisions, autopilot 401(k)s make all the critical choices.

Eligible employees are enrolled in a plan automatically, and they automatically contribute a higher portion of their incomes each year. The money is invested for them in a suitably diversified portfolio, such as a life cycle fund or a target date retirement fund. Employees who want to make their own investment choices may do so.

If your company's retirement plan doesn't offer an autopilot option, you can still take some simple steps to make the most of your retirement savings.

• Sign up. Currently, 82 percent of eligible workers participate in their company's 401(k) plan.

• Capture the match. Contribute at least enough to get your employer's matching contribution.

• Keep it simple. If you have the opportunity, invest in a target date retirement fund. The closer your anticipated retirement, the more conservative the investments.

• Roll it over. With an account balance of at least $5,000, you have two choices if you quit or retire: Leave your money in your employer's plan, or roll it into an IRA. Balances of less than $5,000 will be rolled over automatically to an IRA.

• Max out. Contribute the maximum amount to your 401(k), and you'll be among an elite group that includes only about 10 percent of workers.

• Play catch-up. If you are 50 or older, you can contribute an additional $4,000 to your 401(k) this year, for a maximum of $18,000. Next year, the limit for all workers increases to $15,000, plus $5,000 in catch-up contributions for those 50 and older.