Can we afford to save in a 401(k)?

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Q. My husband thinks we don’t earn enough to save in his 401(k) but I think we have to. How can I convince him?
— Wife

A. It’s time for a sit-down with your husband.

Remember not to attack him, but use your powers of persuasion.

Start by having a conversation about your eventual retirement.

Talk about what you’d both like your retirement to look like and what it may cost.

Most likely if you’ve worked for more than 10 years, you will have a Social Security benefit at retirement, but generally, this will not make up for the loss of your current income, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

The burden of making up the difference will fall on you.

If your employer has a retirement plan, you should look to contribute at least up to any match that is given, D’Agostini said.

“The match is extra compensation that your employer is giving to you, but often you must contribute to get that match,” she said.

It’s free money that you don’t want to leave on the table.

D’Agostini said a good rule is to try to save 10 to 15 percent of your income each year.

There are many benefits to saving in a retirement account.

If you’re using a traditional 401(k) account, you get a current deduction from your income for the amount that you contribute, D’Agostini said, therefore you will not pay tax on that amount.

Maybe your husband will like the idea of a lower tax bill.

Then, the money you contribute, plus any employer match, grows income tax-free, and will most likely not be used until you are retired, she said.

When you withdraw the funds in retirement, it will be taxed as ordinary income. Often you are in a lower tax bracket at that point, she said.

Then there’s the time that’s on your side.

“The value of compounding interest and/or dividends is another compelling argument in favor of this long-term investment,” she said. “The earlier you start saving, the less you will need to contribute.”

Because the greatest risk in retirement is longevity – living too long – it is wise to start saving now for retirement, she said.

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