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PLANS SET YOU UP FOR RETIREMENT WITH NO EFFORT

If you're lucky enough to have the newest kind of 401(k) plan, you're off to a good start even if you don't lift a finger, experts say.

The hot trend in retirement savings plans is making the 401(k) run on autopilot. Employees are enrolled automatically. The plan decides how much you should contribute and simply takes the money out of your paycheck.

How your money is invested is decided for you. And your contribution amounts and investment allocation automatically change over time. You can tweak those decisions - as you can with a traditional 401(k) - or even opt out of the plan. But if you don't do anything, you're still probably better off than if you didn't enroll.

"These plans are designed to make a lot of the right decisions for the worker," said Jon Dauphine, director of economic security strategy at retiree group AARP. "Even if inertia rules and the employee doesn't do anything, they'll still be in a plan that gives them a good outcome."

Until last year, few employers had automatic 401(k)s because companies were afraid they could be held liable if workers didn't save enough or invest well enough to meet their retirement needs. The Pension Protection Act of 2006 changed that by creating "safe harbors" - guidelines for automatic 401(k)s that employers could use to help protect themselves from liability.

As a result, 40 percent of employers that don't yet have automatic 401(k)s say they plan to implement them, Dauphine said.

The plan guidelines are widely considered to be a good start for workers who otherwise would not have participated.

Companies that offer automatic enrollment rave about it for a variety of reasons: It vastly increases participation rates, with more than 85 percent of eligible workers - sometimes more than 95 percent - enrolling, compared with about 70 percent in plans that use traditional "opt in" enrollment. Workers in automatic 401(k)s are more satisfied with their plans and are likely to save a higher percentage of their pay, according to a survey.

Plus, participants in automatic 401(k)s are more likely to have an appropriate mix of investments in their accounts. Before the 2006 pension law was enacted, if you didn't decide how to allocate your assets in an automatic-enrollment plan, your money was likely to go by default into a super-safe but low-yielding fixed-income investment such as a money market fund - not the best place for your savings if you have a long way to go before retirement.

The features of an automatic 401(k) plan can make a big difference in how much money you end up with in retirement.

That's because the biggest mistakes employees typically make in saving for retirement are starting too late, saving too little and investing too conservatively.

An automatic 401(k) can solve those problems.

"These plans are designed to work with the way that real people behave," Dauphine said. "When you design a system that way, it tends to be very powerful in helping people save."

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