Time races by so fast!
The same thing happens when trying to fund a retirement
account. The years go by so fast and people end up playing
catch up while they try to save for retirement. We believe
there is always enough time to save, but procrastination is
a major factor that keeps our retirement accounts on empty.
Before people realize it, they’re scratching their heads
wondering why they didn’t save for their golden years.
The National Institute on Retirement Security did a study
on working-age households in the U.S. and found that more
than 90% are not saving enough for retirement. Some other
shocking numbers found: 45% have nothing saved and those
who have savings that are nearing retirement age only have
$12,000 in their retirement accounts. Who can live off $12,000
for the rest of their life?
There is always the thought that ‘Social Security will take care of me’.
With the US government having 16 trillion in debt and a
government shutting down, who can count on this fiasco to
be part of their retirement plan? And those that think their pensions
are secure need to have a back-up plan in place. Look at what is
going on in Detroit; Unions are fighting to keep their pensions off
life support. Furthermore, with major corporations like United Airlines,
Delphi, U.S. Airways and many more terminating their pension
plans for employees, nothing seems to be secure in today’s world.
I hate to be the bearer of bad news, but I’m the type that likes to
have all my ducks in a row to avoid problems before they happen.
Now, most people are wondering: ‘Well then, where is the money
going to come from?’
The answer: From the leaks!
Have you ever driven a car that leaked oil? Have you ever had
a leaky faucet that continued to drip water? A drip here. A drip there.
It doesn’t seem like it will cause havoc. But those small drips
can cause bigger problems in the future.
Daily drips are also happening in people’s wallets. There is
a continuous separation of you from your money. Those gourmet
burgers, lattes and frappuccinos, the muffin to go along with
that frappe, and those second and third Appletinis are examples
of continuous leaks. The extra $3 to $10 daily purchases really
add up quickly. Just $3 a day of leaks in your pocketbook adds
up to $90 a month that could go toward your retirement account.
$10 a day takes away $300 a month from funding your
retirement account.
How do you stop the leak? Start a saving plan for retirement, TODAY.
We have all heard the old cliché, ‘Pay yourself first’. With the
billions of choices out there separating us from our money,
this practice seems to be lost. Make it the new normal in your
life by paying yourself first every month.
If your employer offers a 401(k) plan, then talk to
your Human Resource department to get started.
When you fund your 401(k), you receive a tax break.
Your contributions are taken out by your employer before
income taxes are deducted. This means you lower the
amount of income you pay taxes on. In addition,
the majority of employers will match a portion of
your contributions dollar for dollar. Why give up free money?
Also, I would advise opening and funding a Traditional IRA
or Roth IRA at your local discount brokerage house. I prefer
a Roth IRA over a Traditional because of the tax advantages,
but both accounts grow tax free. The main advantage of a
Roth over a Traditional is: All of the contributions you make
to a Roth can be withdrawn penalty-free at any time, for any reason.
Also, you can use your Roth IRA as your emergency fund since
the contributions you made can be withdrawn tax free.
If you have a plan in place then work toward increasing
your contributions, because time will pass you by
before you know it.
Start dripping your money into your retirement account
instead of letting it flow into everyone else’s pocket.