This article explains Automatic Enrollment and Automatic Escalation, including how to opt-out
If your plan has an automatic enrollment feature, you may be automatically enrolled in your retirement plan at a percentage determined by your employer. This percentage is stated in your plan documents and your welcome package. Automatic enrollment is a common way for employers to help their employees by ensuring they're saving for retirement, as some employees intend to enroll but may forget to when they become eligible. However, keep in mind that even though you are automatically enrolled, you will still need to register for your Vestwell account to make any changes and manage your account. You may click here to watch our brief “How to Register for Your Account” video.
If your plan is also set up with an automatic escalation feature, your deferral may be automatically increased annually. The increase will occur on a date and by a percentage determined by your employer. Details are stated in your plan documents and your welcome package. Automatic escalation stops when you have reached a predetermined percentage, which is also stated in your plan documents. This is another way for employers to help their employees try to achieve their retirement savings goals.
If your plan is set up with automatic enrollment and you do not wish to participate in the plan, you will need to opt-out. If you do not opt-out prior to achieving the eligibility requirements outlined in your plan (meaning, the age and/or length of service when your company deems you eligible to participate), contributions will be automatically deducted from your paycheck at a percentage determined by your plan.
Before you make that change, consider that even though saving might temporarily strain your budget, in retirement, you will likely need money. So we challenge you to take advantage of your retirement plan ) for at least a few months to see the impact. Even setting aside a small amount of your paycheck can add up and make a big difference in your savings when you’re ready to retire. In addition, if your employer provides a match, you will be gaining free money. Plus, your future self will thank you!
In the example below, an individual has a $45,000 gross annual income*. The blue area of the graph represents saving just 1% of pay over 40 years. The gold area represents a 1% starting contribution with a 1% annual increase until contributions reach 15% and contributions continue for 40 years, with a hypothetical rate of return of 7%.
*Note that the example above also includes an annual pay increase of 2%
While $118,910 may not provide a large amount of income in retirement, it could be a decent emergency fund for those unexpected expenses that your social security income won’t cover. But let’s look at the larger number; by increasing 1% until you are saving 15%, you could have $1,220,175 for retirement. That’s a big difference! Plus, if you are fortunate to have an employer match, you could have even more!
How to opt-out:
If you would like to proceed to opt-out of automatic enrollment, please register for your Vestwell account (https://connect.vestwell.com/register) and set your deferral rate to 0%.
Alternatively, if you prefer to stay in the plan, you can always change your pre-determined deferral percentage to an amount that better suits your needs. To change your deferral percentage, please click “Change Savings” on the “I Am Saving...” box located on the main page of your participant portal. Once you have entered the percentage you prefer, please select “Save Amounts,” and your employer will be notified accordingly.