Retirement security is a particular interest of readers of this column, as is the subject of 401(k) plans -- for good reason. Anyone lucky enough to work for a company that offers a 401(k) that is matched gets to benefit from other people's money. Even an unmatched 401(k) benefits from pre-tax contributions that don't show up on a W-2 as taxable income.

A 401(k) wasn't the name of the game until the late 1970s, with the passage of section 401(k) as part of the Revenue Act of 1978. Before that, saving for retirement was based on the "three-legged stool," with the legs being made up of Social Security, a pension and personal savings.

Pensions had arrived on the scene in 1875, when the American Express Company set up the first private pension, according to the Pension Benefit Guaranty Corporation, a U.S. government agency (tinyurl.com/249s8zdc). Social Security was enacted in August 1935, when President Franklin D. Roosevelt signed the Social Security Act into law (tinyurl.com/4e8t96um).

Social Security still plays a very important role. However, Social Security payments don't -- and never were intended to -- cover all of a retiree's financial needs.

And, as you can imagine, financial needs do vary person to person, while Social Security payments cap out at a certain level. By design, lower earners' benefits can cover more of their living expenses than those of higher earners.

The estimated average Social Security monthly benefit for all workers in 2023 is $1,827 ($21,924 for the year). For a couple who are both receiving benefits, the average is $2,972 ($35,664 for the year), according to a Social Security fact sheet (tinyurl.com/5dvnspyd).

The maximum benefit is much larger ($4,555 a month for someone who claims Social Security at age 70). The maximum benefit for a 62-year-old claimant is $2,572 (tinyurl.com/3j2s8vst).

For me, as a proponent of financial literacy education and as a professional money manager, while Social Security remains important, the concept of the three-legged stool has lost its meaning.

We now have retirement accounts that individuals can set up on their own: IRAs, which entered into the picture in 1974 with the enactment of the Employee Retirement Income Security Act (tinyurl.com/bdzh4bn8). About 40% (48 million) of U.S. households have IRAs (tinyurl.com/3acbbh7z).

Four times as many (66%) private-sector workers had access to 401(k)s (and other defined contribution plans) than pensions as of March 2022, according to the Bureau of Labor Statistics (tinyurl.com/3p94c26d). Only 15% of private-sector workers had access to pensions (defined benefit plans).

Younger workers are aware of the benefits of 401(k)s, as can be seen from second quarter of 2023 data from Fidelity's analysis of 25,100 corporate defined contribution plans and 23.1 million participants as of June 30, 2023 (tinyurl.com/2rvc5cbx). Fidelity is a multinational financial services company.

Notably, 401(k) balances for Gen Z (born 1997-2012) were up 66% from the second quarter of 2022, and millennials (born 1981-1996) saw a 24.5% increase.

I like those trends.

But, if you step back a moment, you can see that some who could participate are missing out. They are missing the advantage of having other people helping them save: the employers who provide matches or other contributions, and our tax authorities who don't consider money earned at work but contributed pre-tax as W-2 taxable earnings.

Only 56% of eligible employees participated in their workplace 401(k) retirement plans in 2022, according to a Bank of America report examining data of more than 25,000 companies and more than 6 million employees (tinyurl.com/mt5j93t8).

If I were to guess, you probably know someone who is eligible for a 401(k) but not participating. What's stopping them? Let's see if you or I can help them learn about the benefits 401(k)s offer, including how to afford to make 401(k) contributions.

And, if you are a participant who gets "the big deal" about 401(k)s, I encourage you to compete for the title of 401(k) Champion. The competition, which I sponsor pro bono, seeks to honor people who not only maximize their 401(k) benefits, but also to inspire others to do the same. Learn more at 401kchampion.com. Don't hesitate to write to me (readers@juliejason.com) with questions and comments.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

In celebration of National 401(k) Day (Sept. 8), I’ll put on my financial literacy hat and offer some advice. Everyone who works for a company offering a 401(k) needs to sign up -- yes, everyone.

Far too many eligible employees are left out. CNBC’s Your Money Survey confirmed that 41% of 2,700 people surveyed in August did not contribute any money to a 401(k) or an employer-sponsored plan. Everyone should contribute. And everyone who does participate needs to learn how to maximize the leverage that 401(k)s offer -- especially if the plan offers an employer match.

I’m giving you only surface-level advice, but I’m happy to do more as a longtime proponent of financial literacy education for individuals of all financial means. Every 401(k) decision comes down to understanding how the plan works, and that calls for education, which calls for taking the time to study the plan -- all extraordinarily important to do now, not later, since you lose if you delay.

I first researched 401(k) education long ago to prepare to write my first book on the subject in the 1990s. “You and Your 401(k)” was published in 1996, followed by “The 401(k) Plan Handbook” in 1997.

Today, my writing is for broader audiences, but my financial literacy mission is still narrowly focused on promoting 401(k) education. There is simply no reason for employees to miss out on the full advantages of 401(k)s -- even if they believe they can’t afford to contribute.

On that note, let me throw a challenge to HR, benefits and tax experts. What advice would you give to those that feel they cannot afford to contribute? How can you make the contribution affordable? This is a subject I’ve written about, and there are answers that can help.

Answers to questions like those and others can help employees take charge of their retirement security, a valuable goal for employers and employees alike.

Teaching people to use the 401(k) to help achieve retirement security led me to do more than just speak and write about the subject. Five years ago, I created and funded the 401(k) Champion® Competition, with the goal of encouraging employees to talk with each other about their 401(k) benefits. The 2023 contest is now live. See 401kchampion.com.

The national competition is centered on 401(k) education on a grassroots level. Participants write an essay about how they would advise co-workers on why they should contribute to and maximize their 401(k)s.

If you’d like to support the educational effort, tell participants about the contest, which I run pro bono. Three winners earn the title of 401(k) Champion® and $1,000 each.

I’ve said before that a peer-to-peer message from one 401(k) participant to another can be more effective than attending an employee enrollment session or reading a brochure.

That is reaffirmed by 2022 401(k) Champion® Kevin Alexander, who said: “I’ve received a lot of advice over the decades. ... The best advice I ever received? Start a 401(k) and do it today.”

If you are a benefits or HR expert who wants to improve employee understanding of the benefits of 401(k)s, I invite you to write to me (readers@juliejason.com). I will make myself available to share what I’ve seen work to start a dialogue among employees about their retirement security and how to maximize the leverage a 401(k) offers over what they can do on their own.

Just consider this: If there is a dollar-for-dollar employer match, what investment can double your money so easily?

This is an exciting time for 401(k) plans for other reasons as well. As Brian Anderson, editor-in-chief of 401(k) Specialist Magazine, points out: “Recognizing its potential, lawmakers crafted many provisions in the SECURE Act of 2019 and SECURE 2.0 in 2022 specifically to make it easier and more affordable for small- and medium-sized businesses to provide 401(k) plans for their workers.”

Finally, for the skeptics: No, I’m not in the 401(k) business.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Are you looking to catch up on saving for retirement?

If you are 50 or older and worried about having enough money saved for retirement, you need to learn about catch-up contributions. First, let's talk about 2023; then, we'll address changes coming in 2024 and 2025.

Catch-up contributions are extra funds you can contribute to your retirement account when you are 50 or older (tinyurl.com/48dhafrf).

For 2023, the catch-up contributions for 401(k)s and 403(b)s (defined contribution plans) can be up to $7,500. If you want to maximize your contribution for the year, adding $7,500 to $22,500 (the maximum contribution for 2023) will bring you up to $30,000 that you can contribute to your 401(k) plan at work in 2023.

The catch-up contribution for an IRA in 2023 is $1,000, although that amount will be indexed to inflation starting in 2024. The maximum you can contribute to an IRA with the catch-up is $7,500 ($6,500 plus the $1,000 catch-up if you are 50 or older).

To stay on top of things going forward, keep in mind that you need to check yearly cost-of-living adjustments for both regular contributions and catch-up contributions. There are also yearly limits for the total amount that is contributed (tinyurl.com/2hvetkev).

Keep in mind that there are also limits to the amount an employer can contribute.

The 401(k) limit for an individual of any age for all contributions (including the employee's and the employer's) is $66,000 in 2023 (or 100% of a participant's compensation, whichever is less).

For an individual age 50 or older, the catch-up contribution increases the $66,000 maximum to $73,500 for 2023.

At the moment, catch-ups can be directed to pre-tax or Roth 401(k)s, if the plan provides for after-tax contributions -- not all do. But, starting in 2024, high earners will be constrained.

Section 603 of SECURE Act 2.0 requires catch-up contributions for high earners (income of more than $145,000 in the previous year) to be designated as post-tax Roth contributions, not as pre-tax contributions.

That means there is less freedom for you, the high-earning participant, to make a choice. Congress has taken that away from you, starting in 2024. If you are a high earner, your catch-up will be after-tax. (A lower earner is still free to choose.)

Pre-tax contributions lower your taxable income by the amount of the contribution. After-tax contributions do not.

However, after-tax contributions will grow tax-free forever (unless Congress has other ideas someday in the future).

An estimated 16% of the eligible participants in Vanguard defined contribution plans made catch-up contributions in 2022, including about half of the participants who had income over $150,000, according to Vanguard's "How America Saves 2023" report (tinyurl.com/342yx7wh).

About 200 organizations signed a letter in July to the leaders of the House Committee on Ways and Means and the Senate Committee on Finance asking that the Roth catch-up requirement in Section 603 involving the $145,000 threshold be delayed for two years so that plan recordkeeping and compliance systems could accommodate the change (tinyurl.com/3a8rx525).

The issue was addressed on Aug. 25, 2023, through Notice 2023-62 (tinyurl.com/39jjufm7). The notice indicated that "the first two taxable years beginning after December 31, 2023, will be regarded as an administrative transition period" related to the Roth catch-up requirement and the $145,000 threshold, adding that during that time, catch-up contributions will be treated as satisfying requirements even if they are not designated as Roth contributions, and a plan that does not provide for designated Roth contributions will still be treated as satisfying requirements.

Further guidance from the IRS is expected. "The Treasury Department and the IRS intend to issue further guidance to assist taxpayers with the implementation of section 603 of the SECURE 2.0 Act," quoting Notice 2023-62.

Now is a good time to talk to your tax adviser to address additional funding for your future retirement.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION