Disclaimer – I wrote this at the beginning of January to be posted on my employer’s blog during that first month of 2015, but someone dropped the ball and didn’t get this on the site until March… You’ll notice that this post is topical and was intended to be read during the first few weeks we were back from vacation after the new year. Any who, happy reading!
I won’t say it. I promise, I won’t say it. Well, I’m going to promise to try my hardest not to say it… too often. I picture you, sitting there with your cup of coffee and low-fat blueberry muffin wondering “What!? What isn’t she going to say? Tell me already!” Here it is – What’s your 2015 resolution? From the bubbly receptionist who answers your incoming call when you schedule your dental appointment, to the college student who grooms your dog, and even your local surfer bro who sells your Mr. Zogs, everyone is recognizing that this month is the start of something new. While some are making resolutions to lose those lbs their doctor has been hassling them about for years and others are signing up for gym memberships faster than you can say “treadmill,” us smart guys over here are busy focusing on an important long-term resolution (really, it’s a lifestyle decision) that started long before the clock struck midnight and we jumped into year 2015: working towards financial security for our (inevitable) retirement.
Let’s face it, the idea of ourselves at retirement age can seem preposterous, laughable or even downright frightening. But the reality is that the decisions we make today heavily impact our ability to retire in dignity in the future. I’m here to share my favorite tip that can help you make better financial decisions, positively impacting your future self. Are you ready for this life-altering tip? Here it is: When you get a little extra money, save it! It’s that simple. If you were an extra good kid in 2014 and Santa stuffed a few Benjamins in your stocking, grow those greenbacks by putting them someplace safe – your 401(k) fund. When your boss walked in to your office on December 31st, hit you with a high five and congratulated you for all your positive contributions to the team by giving you a 4% increase in your salary, capitalize on that surge in coinage and increase your 401(k) contribution by that same 4% before you even see those net pay numbers on your paycheck go up.
Stretching Your New-found Wealth
To get the most out of your newly acquired money today, tomorrow and twenty years from now, you should put your money where you can’t frequently see or easily spend it – into your 401(k) fund. Over the holidays, my parents asked me what drives me to save for retirement. My reply was fourfold:
1. Because I want to be able to travel to exciting, foreign places when I get older and have the time to enjoy it, unplugged and totally offline;
2. To help my (future) kids pay for college;
3. So I don’t have to work until I’m 100 years old;
4. And most importantly, because I’m not counting on social security benefits as replacement income once I hit retirement age, which is currently 62, but is estimated to increase to 67 for those of you that are 80’s babies like myself.
I want to feel secure about myself and my finances when I hit my 60’s. I want to be able to play golf all day on Sundays, score those great Clubhouse seats to a Broncos game or fly across the country to visit my best friend at the Cape without having to stress about how I can afford to do these things once I stop working full time. The only way I can feel comfortable about a bright future is to save now.
Does your employer offer a 401(k) plan? If so, enroll it tomorrow. If your employer offers a 401(k) match, there is even more encouragement to contribute to a 401(k) fund. Look at employer 401(k) matches from this angle: your employer is giving you free money. Free money! FREE MONEY! You would have to be foolish (you may want to substitute another word/phrase here) not to accept free money. If free money isn’t a strong enough incentive to start saving for your retirement that you opened up a second browser window to email your HR department at this very moment and ask for a 401)k) enrollment form, you must be ridiculously independently wealthy and you should stop reading this article immediately.
Save now, have financial security later
As I said before, if you’re looking forward to a fun and exciting or, adversely, a relaxing, lifestyle when you hit your golden years you should spend time now contributing to the financial security of your future. When unforeseen money drops in your lap, don’t run out and spend it; invest it where it will make a strong positive impact on your future – your 401(k) fund. You’ll surprise yourself when you see that the extra 4% of your salary you stashed away (via your 401(k) fund) in 2015 turn into to a healthy $500k over 35 years.* And $500k can pay for a lot of golf now, can’t it?
*Dependent upon your current income, employer match and investment election rate of return. Calculate your potential 401(k) earnings here.