This Week In Your Wallet: Why Everyone’s Talking About Your 401(k)
In the spirit of Halloween, here’s a spooky statistic: Nearly half of families have no retirement account savings at all, according to a 2016 report by the Economic Policy Institute (EPI). That’s why the talk of slashing the amount of pretax money Americans can sock into their 401(k) retirement plans each year from the current $18,000 ($24,000 if you’re 50+) to $2,400 is so troubling. (Note: It’s not like you couldn’t put in more. The remaining money contributed would be treated as a Roth contribution, taxed when you put it in, not when you take it out.)
There is conflicting research on the impact this might have. This Wall Street Journal piece cites a study conducted by economists at Harvard and Yale that looked at nearly a dozen large companies that added a Roth option to their 401(k) plans and found contribution levels didn’t change. That’s good news. But as this analysis by the nonpartisan Employee Benefit Research Institute (EBRI) shows, well more than half of the roughly 55 million American workers who save in retirement accounts are contributing more than $2,400 a year — and they’d all feel the change in their paychecks.
This, like so many other important financial issues — healthcare, anyone? — is frustratingly being batted around D.C. We’re watching. And we’ll let you know if and when there’s a change you should act on. Until then, let’s talk about another way to put more money in your pocket.
Consider Talking About Your Salary…
How would you react if someone asked you how much money you make? If you’re a Baby Boomer, you might balk at the question, but a new survey by TheCashlorette.com suggests many millennials would have the opposite reaction. Nearly two-thirds of the younger generation disclose their salary to their immediate family, 48 percent share it with friends and 30 percent talk about it with coworkers.
Why should we follow millennials’ lead on this? If we can get proactive about pay transparency, “then we’re less likely to suffer the opportunity cost of not knowing sooner [that we’re underpaid] and then not negotiating,” says Stefanie O’Connell, author of “The Broke and Beautiful Life.” One perk of this new candidness is added pressure on employers to open up about why some workers are paid more than others — and to formalize compensation and promotion practices, reports The Wall Street Journal. So open up a bottle of wine (or a pot of coffee) and try talking salary with your girl friends. Or, sit down and read (or re-read) Mika Brzezinki’s Knowing Your Value: Women, Money and Getting What You’re Worth. I spent part of yesterday at Mika’s latest Know Your Value conference in midtown Manhattan, appearing on a panel with CNBC’s Sharon Epperson and MSNBC’s JJ Ramberg. JJ acknowledged that reading Mika’s book empowered her to ask for — and get — an overdue raise. And, if you missed JJ on HerMoney, listen here.
…And Asking For More
The time to ask for more is not just when it’s been too long between raises — or after you’ve brought added, measurable value to your employer — but also whenever you’re changing jobs. A recent survey by CareerBuilder found that a whopping 56 percent of workers don’t negotiate their pay upon receiving a job offer. But here’s the thing: The majority of employers are expecting a negotiation. According to the results, 52 percent of employers say when they first extend a job offer, they offer a lower salary than they’re willing to pay to make room for negotiation. How much could you lose out on by avoiding the conversation? The answer could be thousands — as 26 percent of employers who make a lower salary offer upfront say they offer $5,000 or more below what they’re willing to shell out.
Those who didn’t negotiate cited not being comfortable asking for more money, fear the job offer would be withdrawn or not wanting to seem greedy as the chief reasons. If these hit close to home and you’re coming up on a job offer or an annual review, try practicing your negotiation conversation. The first step to this arming yourself with information. Sites like Glassdoor.com, PayScale.com and Indeed.com can give you a good idea of fair pay for your position, and it’s a good idea to keep an “accomplishments” folder at work with praises, metrics and other concrete things you’ve brought to your current company. When it comes to language, a good start is telling the person you know that X and X qualities are very important to the position — then, you can say, “Based on my experience with X and X, I think I could hit the ground running here. As a result, would it be possible to add X to the salary?” For more guidance, I wrote a piece for The Balance about magic words to narrow your pay gap, and you can read it here.
Answers About Car Insurance Costs
Finally, have you ever wondered what goes into the cost of your car insurance? For many, it’s shrouded in a bit of mystery — your age, gender and even your car’s type and color can make a difference. The good news: A new tool from The Zebra, which runs a car insurance comparison website, wants to change that. The company is offering a new Insurability Score that pulls back the curtain on consumers’ insurance premiums, offering “what is affecting their insurance risk, by how much, and what they can do about it.” The score is free for users who create an account and input some information (like zip code, vehicle type and insurance history).
Have a great week,
Jean
