WEEK 8: THE NEXT 10 WEEKS WILL TELL YOU IF YOUR EMPLOYER 401(K) PLAN IS IN GOOD ORDER “WHAT IS DISCRETIONARY INCOME?”
According to Investopedia, discretionary income is the amount of an individual’s income that is left for spending, investing or saving after paying taxes and paying for personal necessities, such as food, shelter and clothing. Discretionary income includes money spent on luxury items, vacations, and nonessential goods and services. Because discretionary income is the first to shrink amid a job loss or pay reduction, businesses that sell discretionary goods tend to suffer the most during economic downturns and recessions.
This term is passed around like a bottle down south but no one spends any time calculating it and re-assessing it as it fluctuates. If bread and milk goes up in price (that goes for gluten free rolls and almond milk substitute too), it affects discretionary income. Gas prices, tax increases, medical premiums and the like all have an effect that impacts the money that’s left over.
The money you save for retirement is impacted by the ebb and flow of the economy, an ebb and flow for the most part, you have no control. One of the hardest things to do in this busy world of raising kids, working two jobs, paying the bills and keeping up with the Jones, is to make sure that when there is room to increase retirement savings, is that it gets done.
As a sponsor of your company’s 401k, it is imperative that your provide services that allow your employees to take full advantage of the benefits you offer. Having a provider and an advisor that knows how to aid both you and your employees to do so is invaluable.
See you next week.