Week 1: Financial Security Starts Now!

"10 in 10: Ten Must-Read Stories, in Ten Weeks" - Week #1

As the old saying goes, “People don’t plan to fail, they fail to plan.” This is especially important for young professionals to realize. As you think of your future when you reach the age of 70, will you be required to work or will you choose to work? 

Our direct experience as one of the largest pension, 401(k) and 403(b) consulting firms in the Midwest, serving 1,100 for profit and non-profit firms demonstrates that successful plan and participant outcomes are a result of maintaining a disciplined process. On a personal basis, achieving financial security is also a disciplined process.

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For example, your organization’s 401(k) or 403(b) plan offers you one of the easiest ways to accumulate vast amounts of wealth in a tax advantaged manner. The key element is that the earlier you start participating in the plan, the easier it becomes overtime to build a retirement nest egg. Current 401(k) and 403(b) participant education approaches utilize behavioral finance concepts in that if you start something early enough, you will tend not to change that routine. In other words, “If you don’t see the money, you can’t spend the money”. Experts say that an individual should be contributing approximately 10-12 percent of their compensation per year to achieve financial security. If your organization has a matching or profit sharing contribution that approximates 3-5 percent of your pay, that will get you almost 40 percent of the way to retirement readiness over a long period of time. It’s up to you to do the rest by deferring a percentage of your paycheck into the plan.  

As an illustration, if you’re able to put $200 per month into your plan and are able to obtain a 7 percent annualized return for the next 30 years then that will accumulate to over $19,400. In reality, is it a $200 decision or a $19,400 decision? Where does the $200 come from? Perhaps it’s a few less stops at Starbucks, fewer nights at the bars, or maybe fewer consumer or impulse driven purchases. So the choice is yours. You are in control. Basically, a properly structured 401(k) or 403(b) retirement plan is like an easy button. If the $200 does not reach your take home pay, then you never had the temptation to spend it. That’s the beauty of utilizing 401(k) and 403(b) retirement plans. And for those currently participating in a plan, consider increasing your contribution each year with each increase in pay. 

So look around you. The choice you make now by participating in your organization’s 401(k) or 403(b) plan is directly correlated to the choices you will be able to make at age 70. What do you choose to do?

Any Questions? If you have an interest in learning more information regarding retirement plans, please check out Kidder Benefits Consultants, Inc. website at askkidder.com or the US Department of Labor at dol.gov/ebsa.

 

 

 

Keith Gredys

CEO & President, Kidder Benefits Consultants, Inc.

 

 

 

 

Kristin Gredys

Marketing Coordinator, Kidder Benefits Consultants, Inc.