This is part 2 of a series regarding your finances. It falls more into the organizing your life for the future, not really the usual organizing the physical objects here now. But it’s something that I’m very passionate about and want to make all of you guys aware of the importance of being prepared.
TL;DR: Put any little bit you can into retirement NOW, especially if you have employer matching. Listen guys, I am not a financial planner and I can’t pretend to be. Do some Googling or ask some friends for financial planner recommendations.
If you’re like me, it’s very hard to visualize the long term future. I’ve only been working for about dozen years and am decades away from retirement. I have a small child and have only been married a handful of years. But, as I’ve learned, the time goes quickly. And starting right now is essential.
Over the course of a life, the early starter above made $3,000 contributions for just the first 10 years and then stopped (for a total of $30k) vs. the procrastinator who did nothing for the first 10 years, then paid for 20 years (for a total of $60k). The early bird has almost 150% more money for half the investment. Compounding interest is a huge deal. You can get so much money over decades if you start right now. I know it’s hard to find room in the budget.
There is a maximum amount you can contribute to your retirement funds, set by law each year. Recently, it has been $5,500 for both traditional IRAs and Roth IRAs. Personally, I’m not able to save that much from my paycheck. However, anytime I get a raise, I go in and try to up the contribution amount to cover the raise so I won’t be tempted to spend it somewhere else.
If your company offers matching, please please please try to put some money into that retirement account! It’s literally free money! If I guaranteed you $2,000 next week if you gave me $1,000 this week, I bet you’d find room in the budget for that. When you don’t contribute to a matching retirement fund, you are missing out on free money.
One more quick note: check your beneficiaries on these accounts, especially if you’ve gotten married or divorced since the accounts were opened. Many accounts do not care what is in your will; it depends who the beneficiary is listed on there. If you have no beneficiary named, it will likely go to your next of kin, or in accordance with your will. But if you listed your spouse who is now your ex-spouse, they could get all of it. Just a warning!
If you’ve got some older kids who are approaching college, here are a two quick things of note I’ve come across time and time again. If you’re a parent, do not dip into retirement funds to pay for college. You won’t be able to get loans for retirement, but you can for college. Second, FASFA says that retirement savings are not counted as an asset when you are doing your student loan applications. To get more aid, move your reportable assets to nonreportable.
Retirement may seem like it’s light years away from where you are now, but it will come up so quickly and you need to be prepared! If you have any questions, please contact a local financial adviser. I promise, they are not intimidating at all and would love to help you out!
If you need help organizing your finances, contact me today.