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Payroll savings plan helps
workers save now, profit later
By Michelle Samaad • Bankrate.com
 We're
spending more than we're saving, and the gap has gotten wider since
the government started keeping track in 1945.
With saving seemingly out of reach
for people living from paycheck to paycheck, Uncle Sam is encouraging
non-savers to make small, regular purchases of Savings Bonds through
employer-sponsored payroll savings plans.
A payroll savings plan lets workers buy U.S.
Treasury Savings Bonds by having regular amounts deducted from
their paychecks. Savings Bonds, owned by about 55 million Americans,
can be bought at thousands of banks across the country, but the
most popular way to buy them is through payroll deduction programs.
Making
saving easy
Outside of the workplace, the Treasury offers the EasySaver
program, where instead of coming out of a paycheck, money is automatically
deducted from the saver's checking or savings account.
"For many young people just starting out,
saving for retirement is seen as a luxury they can little afford,
and don't need to worry about yet anyway," says Dino DeConcini,
executive director of the Treasury's Savings Bond marketing office
in Parkersburg, W.Va. "Of course, the earlier one starts saving,
the easier it is to save and the more substantial the savings in
the long run."
Here's how EasySaver works:
- Make sure that your bank or credit union
permits electronic debits from the account you want to use.
- Download the enrollment
form from the Bureau of the Public Debt's Web site, fill it
out and mail it to the address provided on the form along with
a voided check from your checking account or a deposit slip from
your savings account. The form allows you to designate the exact
dates of purchase. For example, you could request to buy three
$100 EE bonds per year, on the 20th of February, May and July.
The minimum amount that can be debited through EasySaver is $25
twice a year.
- It takes about four weeks for the first debit
to occur and two weeks for the delivery of the bonds following
each scheduled debit. Be sure to keep a copy of each order for
your records, DeConcini advises.
- You can stop the automatic deductions or
make changes at any time by sending in a request at least three
weeks before the next scheduled debit.
- You also can order the enrollment form through
the mail or call 1-877-811 SAVE and mention key code 07 to order
an enrollment form over the phone.
- At work, ask your human resources representative
if the company has a payroll savings deduction program. Most company
programs are similar to the EasySaver program, allowing you to
specify how much and on what date money will be deducted from
your paycheck to purchase saving bonds.
Are payroll savings plans really worth the effort?
Yes, for those who might find it hard to save money, DeConcini says.
"It's a painless, automatic way to sock away some savings."
For instance, invest $3 a day in an EE Savings
Bond for 30 years and the bond will be worth $83,000 upon maturity.
From the day the EasySaver account is activated until the day it
is terminated, the Treasury will automatically issue the bonds to
the customer and debit his bank account, without any further effort
on the customer's part.
Safe,
conservative investment
Some financial planners say payroll savings deductions are also
a good choice for conservative investors who want absolute safety.
"People use savings bonds to round out
the conservative end of their portfolio," says Dan Pederson,
author of US Savings Bonds: A Comprehensive Guide.
That was one bond investor's motivation after
graduating from college.
Kennan Lyle, 28, a systems analyst at Procter
& Gamble in Albany, Ga., signed up for his company's payroll
savings plan during new-employee orientation week two years ago.
He has since purchased roughly $300 in saving bonds.
"It's almost identical to the way my 401(k)
works -- the money is deducted on certain dates and because I never
see it, I don't miss it," Lyle reasons.
And if the numbers are any indication -- roughly
45 million Americans purchase Savings Bonds through payroll deduction
-- payroll savings plans are certainly appealing to the average
person, who may not have a lot of disposable cash.
Case in point: employees at baby and health care
product-giant Johnson
& Johnson believe so strongly in purchasing savings bonds
through payroll deduction that 85 percent of the company's 95,800
workers signed on last year. This made the New Brunswick, N.J.-based
company No. 1 in the nation to participate in such a program.
-- Posted: Aug. 10, 1999
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