The pension reform bill that was recently signed in by George W. Bush has changed the future of retirement planning. Businesses no longer have the heavy burden of paying for its former employees to get rich while their profits suffer. This new plan encourages economic growth and will make us twenty and thirty year olds have a successful economy again. This plan also introduced a new forced savings plan for working individuals with a company sponsored 401(k) program. In the past decades people would depend on the government (social security), and business (pension plans) to fund their retirement nest egg. Finally, it is up to the individual to achieve financial independence, but business will still play a key role in the future.

If you read the article “Big changes for your 401(k), retirement” it describes the ways 401(k) plans will be offered when a new employee gets hired by a company. Starting in 2008, companies can automatically enroll new employees into their company sponsored retirement plan. The rules state that they can enroll an employee in a conservative diversification of funds (probably bonds, and other fixed income securities). Even though I think this is a win-win situation, people still need to be proactive in their retirement. Companies will also offer advice to maximize your 401(k) growth potential. Remember that their advice is still somewhat biased to the company you work for. So do your homework and read some books like “401(k) for Dummies” or “A Commonsense Guide to Your 401(k)”.

I have always said that a 401(k) program should be one of the biggest parts of your retirement savings (if you work for a company that offers one), but remember to always do some research in the funds that are inside the plan. Everyone’s plan is unique to their lifestyles (risk tolerance, age, income, how much you have already saved, ect.), but the younger generation should typically invest in 60% high risk and 40% high quality growth. Here are some other great articles to help you understand your 401(k) “7 hot 401(k) trends” and “FAQ about 401(k)s”

Recommended Books for This Topic

401(k) for Dummies

A Commonsense Guide to Your 401(k)