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Easy Ways To Save For Retirement

03/14/2012 12:53 PM ET

Easy Ways To Save For Retirement - There are some easy ways to put money away and save for your retirement, even though most Americans don’t have a plan through their employer.

To encourage more workers to plan for the future, the U.S. government announced several new federal initiatives. Although employers had the option before, these changes make it easier for them to automatically enroll workers in retirement plans. Some employees will be able to convert unused vacation and sick days to funds for their 401(k)’s, and there’s a new way to save tax refunds.

Automatic enrollment in retirement accounts. When left to their own devices, many employees don’t sign up for their company’s 401(k) plan. To get more workers to save for retirement, many large companies now automatically enroll their workers in 401(k) plans, unless the worker takes the initiative to opt out. A new rule makes it easier for small businesses to automatically sign up their employees for a 401(k) and increase the amount they save each year as well.

The IRS recently streamlined the automatic enrollment process to make it simpler for small businesses to implement. Companies without 401(k) plans may automatically enroll workers in a SIMPLE-IRA. However, they must give employees at least 30 days’ notice specifying what percentage of their salary will be withheld from each paycheck and how that money will be invested.

Investing unused sick and vacation days. About one third of employed U.S. adults do not take all of the vacation days they are allotted each year, according to a 2009 Expedia and Harris interactive survey. Workers who are compensated for unused sick and vacation time may now be able to transfer that money to their 401(k).

Many companies also offer cash for unused days off only when employment is terminated — a time when that windfall may be needed.

Bonding with your tax refund. Workers can already have all or a portion of their tax refund directly deposited into an IRA. Beginning this year, taxpayers can also use their refunds to purchase Series I Savings Bonds by checking a box on their tax return. A pilot study found that the savings bond offering at tax time got many people who were saving nothing for the future to save something: The majority of the savings bond buyers (65 percent) had $5,000 or less in total financial assets.

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