Q. What is an instant, sure-fire way to double your money?
A. Fold it in half and put it back in your pocket!
A. Your 401K plan, with matching employer contribution.
The Simple Math
$1.00 – Dollar You Contribute
$0.25 – Taxes You would have Paid (Roughly)
$0.75 – Amount Missing from your Paycheck
$1.00 – Dollar You Saved
$0.50 – Amount Your Employer Contributes (If Any)
$1.50 – Amount Paid into your Retirement Account
That’s about as easy as it is ever going to get to instantly double your money. You contribute a dollar, seventy-five cents disappears from your paycheck and a dollar-fifty shows up in your retirement account.
Are you feeling lucky?
If you are lucky enough to work for an employer who offers a 401K plan with matching contributions, you should be thankful and take full advantage of their generosity. Even if your employer doesn’t match your contribution, the tax benefits are too good to pass up.
If you aren’t so lucky and a 401K plan isn’t offered to you, consider starting an IRA.
What if you are in a different tax bracket?
What if your employer doesn’t match your contribution?
What if you don’t like the investments in your plan?
What if filling out all of the paperwork is a hassle?
What if you “can’t afford” to contribute right now?
What if your co-worker says that it’s a bad idea?
Do you like paying too much in taxes?
Are you looking forward to retiring broke?
Do you usually turn down free money?
Do you believe Social Security offers a better value?
Are you too wealthy to worry about retirement?
Are you expecting a large pension or inheritance?
The Bottom Line
There will always be questions, comments, issues and concerns about any investment or financial vehicle and 401K plans are no different. Just be certain that you don’t let these concerns keep you from being prepared for retirement.