Where Is Your Retirement Plan?

I am truly amazed at the number of folks I meet with who have either not started, or do not fully participate in a retirement plan. I am especially dismayed by those who fit this description and already have retirement in their cross-hairs. I understand its tough enough as it is to pay the bills, especially in the San Francisco Bay Area, and throughout most of California. Maybe it has been my saturation in the field of personal finance, but I feel like the cost/benefit evaluation of a qualified retirement plan should be as obvious today as the health risks associated with smoking.

OK, maybe I am guilty of hyperbolic analogy. But I'm here to help shed some light, and I want my point to be clear. YOU NEED to understand the time value of money, and the power of tax deferral. The United States government wants you to be capable of taking care of yourself financially when you retire, and so they have created some incentives to encourage you to save now, and not rely on social security. In case you haven't noticed, legislators believe we are critically under-prepared for taking care of the retiring baby-boomer generation; you DO NOT want to go through life relying on Social Security 100%. We call this 'whistling through the graveyard'.

If you work for a corporation, non-profit, are self-employed, or a contractor, there is a plan for you. 401(k), 403(b), IRA, Roth IRA, SEP, Simple, Solo 401(k), pension, etc. Don't get overwhelmed by the big picture here. Find your plan, and GO.

Small business folks have a great resource here. If your company offers a 401(k), here is some great resource as well. Did you know that your company now automatically enrolls you for a minimal contribution unless you opt-out? They're doing you a favor. Most companies match a portion of your contribution - depending on how its structured, thats a 50-100% return on your money in the bank! This is a no-brainer, folks.

You will often hear me say that 'the dollar you don't put in your 401(k) is likely the most expensive dollar you spend'. Others advise to 'pay yourself first'. It all starts here. I know the objections, and I understand them. Its time to get over it.

If you need some help figuring out how to make room for these contributions, contact me. Smart mortgage planning will make room for your financial priorities, and this should be one of your highest.