ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -While 3% was the norm at one time, 65% of plans are now using a default rate higher than 3% in order to significantly boost savings for participants over time. In 2022, the most common default rate is now 6% of pay, according to the Plan Council Sponsor of America.

Detailed explanation-2: -Most retirement experts recommend you contribute 10% to 15% of your income toward your 401(k) each year. The most you can contribute in 2023 is $22, 500 or $30, 000 if you are 50 or older (that’s an extra $7, 500). Consider working with a financial advisor to determine a contribution rate.

Detailed explanation-3: -For that reason, many experts recommend investing 10-15 percent of your annual salary in a retirement savings vehicle like a 401(k).

Detailed explanation-4: -For example, let’s assume your employer provides a 50% match on the first 6% of your annual salary that you contribute to your 401(k). If you have an annual salary of $100, 000 and contribute 6%, your contribution will be $6, 000 and your employer’s 50% match will be $3, 000 ($6, 000 x 50%), for a total of $9, 000.