Automatic Escalation

  • When you join an automatic escalation plan you will automatically increase the proportion saved from annual salary increments and/or promotions. 
  • Automatic escalation is a good complement to automatic enrollment since it compensates for the initial low contribution rate in the automatic enrollment program.
  • Automatic escalation overcomes inertia and lack of self-control. 
  • You do not have to decide how much to contribute because automatic escalation contains a default or standard contribution escalation rate.  
  • Automatic escalation gives employees the chance to ‘opt-out’.  Most employees stay enrolled in the plan. 
  • What is the range for the contribution rate?
  • What is the range for the match?
  • Seek appropriate assistance, if you have debt management issues, to decide whether you have the right contribution rate.
  • You may consider adjusting your contribution rate if you do not have an emergency fund ($2000)  and/or are paying high interest charges on credit cards and other loans including your mortgage.
  • Check and increase the contribution rate if you feel the auto rate is too low (like when your bonus is much higher than you anticipate).

MoneyWatch blogger Charlie Farrell's new book outlines exactly how much money you need for retirement - and offers a plan on how to get there. Click here to see him explain the basics to Eric Schurenberg.

Click here to go to the next topic, Direct Deposit, to see the benefits of having paychecks electronically deposited into a federally insured checking account.

About the Financial Literacy Center

The FLC's mission is to develop and test innovative programs to improve financial literacy and promote informed financial decisionmaking.

 

With support from the Social Security Administration, the Center was established in October 2009 by the RAND Corporation, Dartmouth College, and the Wharton School of the University of Pennsylvania in order to develop educational tools and programs that help individuals prepare for their long term financial stability.

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About the Program

Presented by the Financial Literacy Center, a joint center established by the RAND Corporation, Dartmouth College, and the Wharton School of the University of Pennsylvania in order to develop educational tools and programs that help individuals prepare for their long-term financial stability.

more