Last week, our Money Coach Bill Stanley talked about why some employees don't participate in their company's 401(k) plans. This week, he shares some of the reasons (and excuses) some of his survey respondents gave.

First off, Stanley said it's important to think of our retirement income as a three-legged stool. One of those legs is Social Security; another is a retirement account, and the third is other investment accounts.

“You need all three legs on your retirement stool,” he said. “You cannot rely on just one or two sources of money for your retirement. You cannot sit comfortably on a stool with fewer than three legs.”

In his survey, Stanley found that, in many cases, employers were matching some or all of their employees' pre-tax contributions to the 401(k) accounts. One company has 84 percent participation because new employees are automatically enrolled into the plan at a 3 percent deduction unless they specifically opt out.

“What surprised me at this company was that non participants were of all age groups, with the largest percentage in the 25-45 age group,” he said. “I expected that most non participants would be from the 18-25 age bracket.”

Stanley said he also heard several reasons why employees were not contributing to the 401(k) plans.

“I can't pay my bills if I put money in the 401(k)” – Stanley said this is a very good reason if, in fact, it's true. Many families don't have a budget – so most people don't know where 25 to 50 percent of their take-home pay goes, he said. The first step is to track expenses and the second step is to put together a budget. If you do your homework and still don't have any money left over, then don't contribute to your 401(k), he said. Most people, he thinks, can reduce spending by 10 percent and live a similar lifestyle – and that 10 percent should go to the 401(k).

“I have debts to pay” - Another popular reason not to participate, he said. And it's a good reason if the individual has stopped using credit cards and has put together a detailed “pay-off-my-debt” plan. Most people who blame “debt payoff” as their reason for not contributing are not actually working to pay down their debt. They continue to charge on those cards and have no comprehensive approach to debt reduction.

“The interest rate in a 401(k) investment isn't high enough” – Here's a case where that person possibly doesn't understand investing, he said, because a 401(k) plan doesn't have a single interest rate. There are a range of investments including stocks, bonds and cash. Your investments should be diversified depending on your age and your goals.

“I don't understand investing and I do not trust the system” – Stanley said this is the best reason he heard for not contributing. Frankly, he doesn't trust our financial system either. That's why he said he's spent considerable effort to educate himself on how to invest.

“Looking back, I didn't understand much about investing when I was in my 20s and 30s,” he said. “This comment encourages me to put together some 'short courses' on investing to help people understand what they should be doing with their money.”

Bill Stanley and Money Matters airs every Tuesday on FOX21 Morning News.
If you have a question for Bill, contact him directly: MoneyCoachBill@aol.com