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Important Information for FirstEnergy Professionals: Could You or Your Spouse be Missing Out on 401(k) Contributions?


In the complex landscape of planning for FirstEnergy retirement, prudent management of retirement funds stands as a critical concern, especially in the context of employer-sponsored 401(k) plans. The intricacies of these plans often involve employer matching contributions, an aspect that, if not maximized, can result in substantial financial loss over time. This issue is not just theoretical but is rooted in real-life scenarios, such as that of Niv Persaud, a certified financial planner based in Atlanta. Years ago, Persaud inadvertently overlooked her employer's matching contributions, a misstep that stemmed from a division of financial responsibilities in her marriage, leading to a significant deficit in her retirement savings. This personal anecdote serves as a prelude to a broader, systemic issue that impacts FirstEnergy professionals.

Recent studies underscore that Persaud's situation is far from an isolated case. Research indicates that approximately one in four married couples does not fully utilize the matching contributions offered by employers in 401(k) retirement plans. This oversight results in an average annual loss of nearly $700 — funds that could bolster retirement savings significantly over time. A paper published by the National Bureau of Economic Research, entitled “Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples,” highlights that close to two-thirds of American workers have access to employer-sponsored defined contribution retirement plans, most of which include some form of employer match.

Employer contributions vary, but a common model involves matching 50% of every dollar contributed by the employee, up to 6% of the employee's salary. Despite this opportunity for increased savings, about 24% of married couples forego some portion of these matching funds, as detailed in the findings based on IRS tax data and retirement plan descriptions. This equates to an average financial loss of $682 per year — a sum that could be recuperated by merely reallocating retirement contributions between spouses.

The implications of these statistics extend beyond mere numbers. Taha Choukhmane, an assistant professor of finance at the MIT Sloan School of Management and co-author of the study, emphasizes the importance of not just the quantity but the strategy of savings. It's not merely about saving more, he explains, but about how and where you save. This sentiment is echoed by his co-authors, Cormac O’Dea, an assistant professor of economics at Yale, and Lucas Goodman, an economist at the Treasury Department.

Their research delves into the dynamics of household decision-making, pointing out that the issue isn't about couples who don't save or don't save enough. The focus is on those who could substantially increase their savings by simply shifting contributions from one spouse to the other. Essentially, the solution doesn't require saving more or altering spending habits; it's about the strategic allocation of funds across accounts.

The study's insights reveal a systemic lack of communication and coordination between spouses when it comes to retirement savings, an issue that also reflects broader financial communication within marriages. O’Dea posits a pertinent question regarding what other significant decisions couples might not be coordinating on. Further findings suggest that couples with longer marriages and those with children are more likely to communicate effectively and coordinate retirement savings. In contrast, those in shorter relationships and those nearing divorce tend to perform poorly in this aspect.

Professional financial advisors consistently recommend that workers save 10% to 15% of their pre-tax income for retirement, emphasizing the importance of maximizing any employer match, as this effectively increases the worker's savings rate. For instance, if an employer matches up to 6% of an employee's salary in 401(k) contributions, maximizing this opportunity means contributing at least that percentage of annual pay. Rob Williams, managing director of financial planning at Charles Schwab, reiterates that the primary goal for any investor should be to secure the full employer match.

Research from the Stanford Center on Longevity indicates that individuals nearing retirement, including those in the upper echelons of corporate America, often underestimate the life expectancy increases over recent decades, potentially leading to substantial shortfalls in retirement funds (Stanford Center on Longevity, 2021). Given that many retirees might live well into their 80s or 90s, the significance of optimizing retirement contributions, especially through employer 401(k) matches, becomes paramount. Failure to fully capitalize on these benefits could result in a financial gap during the years where medical and other living expenses significantly increase.

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However, data from investment management company Vanguard reveals that in 2022, 31% of retirement plan participants did not fully utilize their employer’s matching contributions. Furthermore, the challenge of saving is exacerbated for younger workers and has been particularly daunting over the past two years, a period when inflation soared to a 40-year high. The 2023 Retirement Confidence Survey from the Employee Benefit Research Institute found that 84% of workers are apprehensive that escalating living costs will impede their ability to save for retirement.

Despite these challenges, it’s crucial not to underestimate the value of an employer match. James Gambaccini, a certified financial planner in Reston, Virginia, highlights that while a 3% match might seem insubstantial at a glance, it effectively doubles a 3% contribution to 6% without any additional expenditure from the employee. In practical terms, for an employee with a $50,000 salary, a $1,500 contribution could escalate to $3,000, courtesy of the employer match.

In conclusion, the strategic management of 401(k) contributions, particularly in maximizing employer matching, is an area requiring heightened attention and improved communication among couples. The financial repercussions of not fully leveraging these matches are significant, underscoring the necessity for meticulous financial planning and coordination to secure a stable financial future in retirement.

Navigating FirstEnergy retirement savings is like orchestrating a tandem bicycle ride. While both partners pedal forward with their individual strengths and speeds, optimal progress is achieved when they synchronize their efforts. If one rider overlooks the potential to shift gears and enhance speed — akin to neglecting an employer's 401(k) match — the journey becomes more strenuous, and they cover less ground than they're capable of. The road to FirstEnergy retirement, especially for those in the corporate echelon, shouldn't be a solo act or an uncoordinated effort. It requires both partners to be attuned to their financial landscape, seizing every opportunity — every gear shift or downhill slope — to maximize their momentum. This harmonized strategy ensures that the scenic route to retirement is not only enjoyable but also gets them further, leveraging every available boost, particularly the ones they've rightfully earned.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
401(k) Savings Plan: FirstEnergy allows employees to participate in the 401(k) Savings Plan starting from their date of hire. Employees may contribute between 1% and 75% of their base pay on either a before-tax, Roth 401(k), or after-tax basis, or a combination of these. FirstEnergy matches the first 6% of the employee's contributions with 50 cents per dollar, using company stock for this match​ (FirstEnergy Corp.). This 401(k) plan provides flexibility for employees to tailor their retirement savings strategy and includes the benefit of company matching, which helps enhance retirement savings potential over time. Pension Plan: The FirstEnergy Pension Plan is entirely company-funded. Employees become eligible to participate in the plan on the first day of the month following their hire date. Vesting occurs after three years of service, during which the employee must have worked at least 1,000 hours annually​ (FirstEnergy Corp.). The pension benefits are calculated based on an annual pay credit and an interest credit. The pension formula and the years of service required for eligibility reinforce the company's commitment to providing long-term financial security for its employees during retirement.
Restructuring and Layoffs: In 2023, FirstEnergy announced a significant restructuring plan aimed at reducing operational costs. This included layoffs across various departments as part of an effort to streamline operations and improve efficiency. The company stated that these changes were necessary due to the increasing pressure from regulatory changes and fluctuating energy markets. It is important to address this news because the current economic and political environment is highly volatile, affecting operational costs and regulatory compliance. Keeping updated on such changes can help employees and investors navigate potential impacts on their jobs and investments.
FirstEnergy offers stock options and RSUs as part of their employee compensation packages. The RSUs generally vest over a period of time and are awarded based on performance and tenure. Stock options provide employees with the right to purchase company stock at a set price, potentially benefiting from future stock price increases.
Company Website: Start by checking FirstEnergy’s official website for the most accurate and current information about their health benefits. Look for their HR or Benefits section. Reliable Sources: Search on trusted sources such as: Industry news websites (e.g., Business Insider, Forbes) Financial and employment review sites (e.g., Glassdoor, Indeed) Health benefits and insurance-related sites (e.g., Health Affairs, SHRM) Healthcare-Related Terms and Acronyms: Identify and summarize any specific terms and acronyms used in their benefits descriptions. Recent Employee Healthcare News: Look for any recent news related to changes or updates in FirstEnergy's healthcare benefits.
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For more information you can reach the plan administrator for FirstEnergy at , ; or by calling them at .

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