retirement ready

Recently I shared a post on becoming retirement ready that focused on the employer’s responsibilities in helping employees build a retirement plan balance that is sufficient for them to retire without a reduction in standard of living.

But employees won’t succeed in achieving their retirement dreams unless they do their part as well. In order to become retirement ready, employees need to:


First and foremost, employees must contribute to fund their retirement. There are some basic rules of thumb regarding employee contributions that all employees should follow:

Receive the maximum company match

Employees should never contribute less than the percentage necessary to receive the maximum company matching contribution. There is no better investment that employees can make than to obtain free money from their employer.

Strive to add 15% each year

Many studies have shown that employees need to add 15% of their gross compensation each year to their 401k accounts to become retirement ready. This amount includes any company contributions. So if an employer’s matching contribution is 3%, the employee should contribute at least 12%.

Contribute more, here’s how

The average employee 401k contribution percentage is around 6%. The average 401k employer matching contribution is 3%. In order to reach the suggested 15% in annual account additions, employees should be contributing 12%.

But actual employee contribution percentages are half of that. How can employees easily raise their contribution percentages?

One of the most painless ways is for employees to increase their 401k contribution percentage each time they receive a raise. Even if it is only a 1% or 2% increase each year, over time this strategy will result in employees reaching a retirement ready contribution rate.


It isn’t necessary for employees to become experts on 401k plans and investments or how to appropriately invest in their plan. However, to become retirement ready, it is important that employees have a basic understanding of the following:

The plan

Employees should be aware of the important elements of their retirement plan. They should know how much they need to contribute to receive the maximum company match, what the withdrawal and distribution options are and where to find the phone number and email address of someone who can help them with questions.

The website

At a minimum employees should know their plan’s website address and the call center phone number (in the event they get locked out of their account). Given that there are many projection and education tools available on all recordkeeper websites, it wouldn’t hurt if employees explored their plan’s website at least annually.

The plan’s adviser

Virtually every 401k plan now has an investment adviser working with it who is happy to take an employee’s call at any time to answer questions. This can be especially helpful when the stock market crashes and employees become concerned about what is happening and what they should do. Every employee should have this adviser’s phone number and email address.


All 401k plan participants need to exert some effort regarding the management of their accounts in order to become retirement ready. Time spent need not be significant.

Employees can select the appropriate target date fund and make 100% of their contributions to that fund for their entire career. Or, they can hire an advisor who can construct a financial plan for them and provide investment recommendations for their 401k balance.

They can also decide to perform research on their plan’s fund options on their own and be responsible for reallocating their balances on a regular basis. There is a wide spectrum of involvement that employees can choose to have with their 401k plan, and they need to decide what level of involvement they are most comfortable with.


Funding a retirement and becoming retirement ready is a sacrifice. By saving to fund their retirement, employees are electing a lower of standard of living today. This is incredibly difficult for most Americans to understand and embrace.

We are a nation of consumers and have no trouble borrowing to meet our needs. However, we find it very difficult to save. As someone who has worked with retirement plan participants for more than 30 years, I can say with a lot of confidence that most Americans don’t eagerly embrace the challenge of diligently saving over time to achieve an end result that is a long way off.

Many critics of 401k plans have said that they have been a gigantic failure. Because 401k plans depend upon employee contributions, and nearly all employees aren’t contributing near enough, the experts feel nearly all of us will be disappointed in the type of retirement we end up with.

In order to become retirement ready, employees must embrace their responsibilities.


About the Author

Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton is an award-winning 401(k) investment adviser with over 30 years of experience. He has consulted with many Fortune 500 companies, including: Aon Hewitt, Apple, AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Corporation, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or

About Lawton Retirement Plan Consultants, LLC

Lawton Retirement Plan Consultants, LLC (LRPC) is a Milwaukee, Wisconsin-based independent, objective Registered Investment Adviser (RIA) providing investment advisory, fiduciary compliance, employee education, provider management and plan design services to employer retirement plan sponsors. The firm specializes in Socially Responsible Investment (SRI) strategies for retirement plans and is a pioneer in the field. LRPC currently has contracts in place to provide consulting services on nearly a half billion dollars in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or or visit the firm’s website at Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, a plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice, and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.