As you should be aware, as a member of Local 25, you may, depending on the terms of your collective bargaining agreement, be a participant in as many as five pension plans. These plans – the I.B.E.W. Local 25 Pension Fund, the Annuity Fund of the Electrical Industry of Long Island, the I.B.E.W. Local 25 401(k) Fund, the National Electrical Benefit Fund and the International Office Pension Fund – will provide you with income during your retirement years. (The first three Funds are administered by the Fund Office, while the latter two are administered by the Local’s Financial Office.) While all of the Funds provide retirement income, the I.B.E.W. Local 25 401(k) Fund also allows you to save for your retirement by deferring a portion of your weekly wages on a pre-tax (that is, before federal and state taxes are deducted) basis. However, approximately one out of every five 401(k) Fund participants is not taking advantage of this valuable opportunity. The good news is that an average of 8.73% of weekly pay is deferred into the 401(k) Fund by all participants, and an average of 10.39% of weekly pay is deferred by participants who are currently deferring compensation. Deferring a percentage of your weekly income probably “costs” less than you think and, due to the time value of invested money, can provide you with a hefty nest egg by the time you retire.

Let’s say that there are two married construction journeymen, each of whom is age 27, has two children and is hoping to retire at 62. Based on the current wage rate, each earns $2,060 per week. The first journeyman does not defer any money to the 401(k) Fund, while the second journeyman defers 3% of his weekly wages, or $61.80 per week, to the 401(k) Fund. (Both still receive a 3% employer contributions to the 401(k) Fund on their behalf.) However, since the deferral is made on a pre-tax basis, the second journeyman is taxed on lower compensation and the 3% deferral only “costs” him $43.26 per week.

If the second journeyman increased his deferral to 5% of his weekly salary, the weekly deferral of $103.00 would only “cost” him $72.10 per week. But there really isn’t any cost, because the deferred wages are 100% vested and increase in volume over time, since they are credited with the net earnings of the 401(k) Fund. How much can the deferrals grow? The answer depends on the net annual earnings of the 401(k) Fund (the “rate of return”). Assuming a rate of return of 5% per year and no salary increases, at age 62, the second journeyman will have deferred $119,000 in wages and have an account balance of approximately $335,000 if he defers 3% of his weekly income and will have deferred $198,000 in wages and have an account balance of approximately $558,000 if he defers 5% of his weekly income.

So, what if you’re older than our 27 year-old journeymen, but you haven’t been deferring to the 401(k) Fund, or you’ve only been deferring 1% or 2% of your wages? Is it too late to save and supplement your retirement? Absolutely not! You can estimate how deferring different percentages of wages to the 401(k) Fund will affect your weekly take-home pay, as well as the potential earnings from deferring wages to the 401(k) Fund, by using the on-line calculator at bankrate.com/calculators/retirement/401-k-contribution-calculator.aspx. Please keep in mind that the potential earnings are estimates; your actual results may differ based on investment performance and your wages over time.

The 401(k) Fund allows you to change your deferral percentage once a year. You can defer up to 22% of your wages, but no more than $18,000 per year or $24,000 if you are above age 50. (These amounts are periodically adjusted by the IRS.) The form to start or change your deferral percentage can be obtained from your employer and/or the Fund Office. The change should take effect in the next pay period after the form is filed with your employer. We urge you to take advantage of this opportunity and start saving now!

If you have any questions about the 401(k) Fund or any of your other benefits, please visit (372 Vanderbilt Motor Parkway) or call the Fund Office [(631) 434-3344] during the hours of 8:00 a.m. to 5:00 p.m.

This article originally appeared in the Conduit, our Local Unions magazine.