Why should I join a retirement plan?

Read time: 3 to 4 minutes

You may get benefits from your employer—like medical, dental, and vacation days. But possibly the most valuable benefit your employer can provide is a retirement plan. Your employer’s plan is an important tool to retiring with enough money to support yourself after you stop working.

Save for your future

It’s no surprise that retirement can be expensive. And many retirees will need at least 75% to 85% of what they had been earning. That’s why joining your plan as soon as you can—and regularly contributing to your account with each paycheck—can help you get on track to meet your financial goals. When you sign up:

Money is automatically deducted from your paycheck.
You might get matching contributions from your employer.
Pre-tax money you save doesn’t count as taxable income. So you’ll owe less in taxes as you save.*

*When taking withdrawals from a tax-deferred plan before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.

You’ll save more over time

By joining your retirement plan today, you could retire with almost $81,000 more than if you wait just 5 years.

Assumes a $50,000 salary, a savings rate of 12%, and an average annual return of 6%. The $220,714 figure represents the final balance after 20 years of investing. The $139,656 figure represents the final balance after 15 years of investing. This is an example only. It doesn’t represent a real investment, and the rate of return is not guaranteed. The account balance is before any taxes. It does not reflect the 10% federal penalty tax you may have to pay if you take money out before age 59½.

The sooner you join your plan, the more money you’ll have when you retire. It’s that simple.

Don’t wait—join your plan today!

You decide how much to save

Vanguard suggests you save 12% to 15% of your salary each year for retirement. This includes any contributions your employer might make.

If you can’t save that much now, save as much as you can and increase your contribution rate by 1 percentage point each year. It’s easy to do, and you might not even notice the effect on your paycheck later.

A small increase can make a big difference

What does 1% mean to me?

*Assumes you’re paid every two weeks.

Save what you can** and give your investments time in the market. Financial security might be easier to achieve than you thought.

**The average contribution rate for retirement plan participants was 7.4% in 2023. Source: How America Saves 2024. Vanguard, 2024.

You choose how to invest your money

When you join your employer’s retirement plan, you get to choose how to invest your money. You can choose a mix of funds on your own—or you can choose a single target-date investment, if available in your plan.

If you want to choose funds on your own, just follow these easy steps:

Complete a short questionnaire to get your preferred asset mix.
Review the funds offered in your plan.
Choose funds that reflect your asset mix.

Or consider choosing a target-date investment. A target-date investment offers the simplicity of a complete portfolio. It also handles most regular maintenance for you. If the investment’s mix of stocks and bonds is thrown off by the market, it will automatically adjust to keep you on course. If you do choose a target-date option, we suggest you regularly check the asset mix of your investment to make sure it’s appropriate for your current situation.

Make a smart move

Join your retirement plan today

Enroll now

Whenever you invest, there’s a chance you could lose the money.

Target-date investments are subject to the risks of their underlying funds. The year in the investment name refers to the approximate year (the target date) when an investor would retire and leave the workforce. The investment will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. A target-date investment is not guaranteed at any time, including on or after the target date.