Nowadays, more than ever, it is extremely important to ensure that you will have wealth when you retire. The world is in very uncertain flux and no one knows what the future will bring. Depending on who you choose to believe, Social Security might or might not be there.
You might or might not be able to retire at 65. See what l mean about uncertainties? What l do know for certain is that you need to take action and take care of number one. You! You know why? Because nobody cares enough about you. You have to help yourself. This one shrewd and painless baby step can make a world of difference to your financial future.
Shrewd Baby Step for a Better, Rosier Future:
Contribute to your company 401k fund:
Your first move as I’d written about previously is to get a clear financial picture. This alone will point out areas where you can save money and allocate somewhere else that will reap benefits later.
What is the 401k plan?
Update for 2021:
The maximum contribution for the 401K contribution has increased to $19,500. If you are over 50 years of age, you can contribute a catch-up amount of $6500. The maximum amount of contributions from you and your employer can not exceed $58,000.
With the demise of the pensions that our parents had, most companies shifted the responsibility of saving for retirement to the employees. 401k is a tax-qualified, defined-contribution pension account as defined by section 401k of the IRS code. It basically means “you’re screwed later if you don’t prepare now” :-). The maximum you can contribute to your 401k plan for 2017 was $18,000.
Let’s break this down a bit further:
$18000 divided by 52 is $346.15 per paycheck. This is a lot of money for people to part with, especially when living paycheck to paycheck. Let’s look at a 30-year-old person with a salary of $30,000 per year and who contributes 10% of their paycheck which breaks down to $57.69 pretax.
Plug these figures into a 401k calculator and you will see that your contribution over 30 years will be $181,000 by age 65, but your payout will be $1.27 million!!!!! A mind-numbing difference of over ONE MILLION DOLLARS!
Think about all the frivolous things you spend money on. Think really hard. Can you honestly say you can’t find $57.69 dollars weekly? (if your company matches, it’s even less than that!). The prospect of having an extra $1864 monthly at age 65 in addition to your Social Security check should spur you into action.
What if you work for yourself and have no access to 401k?
For those without access to 401k plans, there is the option of the Roth IRA. The Roth IRA allows you to contribute a total of $5500 per year to your retirement plan if under 50. Over 50, the maximum is $6500. You can find more information on the limits here at the Roth IRA website.
This breaks down to $105.77 per week, another doable figure to ensure a better financial future. There is no minimum either, so you could do less. You can open a Roth IRA account at any of the traditional bank or stock trade companies like TDAmeritrade or Scott of Fidelity. Using a Roth calculator, your payout with this scenario at a contribution of $5,000 per year will net approximately $590,000.
Seeing how little it takes to get into the game, you can understand why people find it hard to empathize with people who insist on wasting their money on really frivolous things instead of using it to ensure a better future. As you shop for those holiday gifts that will be forgotten as soon as the 26th rolls around, think of the money that could be put to better use.
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Questions to ask yourself:
Can you put it towards your new Roth IRA? Can you contribute it to your 401k? There is something to be said for delayed gratification. Nothing thrills me more than checking out my 401k statement at the end of the year and seeing how it continues to grow.
I stopped working and took early retirement. I have not contributed one cent since 2013, yet l make more money yearly, more than l was making when l worked full time, thanks to dividends and compound effect. This is what l like to call the Steam Roller effect! Go figure 🙂 🙂 :-).
I think it’s safe to assume that this is how a lot of people have grown their wealth over the years, but prefer not to share, especially with the less fortunate. It takes you actually digging and trying to figure out your own path to see it laid out before you, and once you discover it, you want to acquire financial independence, and sooner than the traditional age of retirement.
No one. I repeat. No one is going to promise you a rosy future. Truth be told, a lot of people do not wish you good fortune. There is too much jealousy, envy, and apathy for people to worry about anyone but themselves.
Make a list:
One of the best ways to make sure you stick to the right path of wealth accumulation is to surround yourself with people who have the same ambitions as you. You can do this by following and maybe subscribing to magazines such as Forbes online where you get constant glimpses of other ways to save.
Another option is by following trusted financial writers (but make sure to vet them first, you don’t want to take advice from people who are themselves drowning.) Remember that all that is shiny is not gold when it comes to the “experts” online. It’s easy for anyone to set up an online persona and prey on the weak. This is a sure way to ruin if you don’t do your due diligence.
If you want a better future for yourself, you need to take all the steps necessary to assure that. Notice l said NEED to! Don’t think you’re too young and have plenty of time. You’ll be surprised at how quickly time passes. Make this one shrewd baby step for a wealthy future. You won’t regret it.