Most of the stores and online retailers are giving us the “Christmas pitch”. Yes, it does start earlier every year. This isn’t just our imagination. I’m not a fan of Christmas decorations displayed as early as Halloween. At the current pace of early Christmas push, we may soon end up with Santa escorting our little trick-or-treaters in his sleigh. I would prefer to at least get through the first part of November before experiencing the Christmas rush. Most of us want to give meaningful gifts, and I’ve got an idea that will help. One of the best gifts we can give our loved ones is our own personal financial security.
I’m hoping you will take a bit of time to think about, and then start, saving a bit more for your future. In my profession, December means open enrollment season for business retirement plans. This is an exciting time as our office is busy conducting enrollment meetings with the employees of our clients who maintain business retirement plans through Life Compass Financial. We love this time of year. It gives us an opportunity to help people take the first step towards saving for their future retirement. For those folks who work in a business that offers a retirement plan, this is an outstanding opportunity. Employer-sponsored retirement plans present a structured method to save for the future while also offering the benefit of your money being placed in a tax-advantaged account (and sometimes even employer contributions are part of the deal). Business retirement plans [401(k), 403(b), 457, SIMPLE-IRA, SEP-IRA, Profit Sharing plans, pension plans, thrift savings plans] all offer a real opportunity for people to help themselves move toward a stable financial future.
Over the last 30+ years I’ve heard a lot of explanations from different people as to why they can’t get started investing for their retirement. Sometimes these objections are quite valid and due to dire financial circumstances; many times, however, these “explanations” are just excuses. Without a doubt, the most important step in saving for retirement is getting started. How the money is invested is important, but if there is no money saved, it can’t be invested. For someone that hasn’t yet started with their company’s retirement plan, I implore you to start if at all possible. Getting started means directing even as little as 1% of gross pay to your retirement account. For most folks, 1% is not going to make much difference in your take-home pay. You probably won’t miss it. But you will be starting on your path to financial security. So, if you can start with 1%, do it. Then, increase your amount by another 1% of your gross pay at the beginning of each year. Again, you probably won’t miss it. By doing so, you begin to somewhat force yourself to save for retirement in a way that is automatic. The money you are saving for retirement goes into the account before it gets in your hands. By saving this way, we tend to form a habit. This habit is truly good for us. It is important to start this process as early as possible, because youth does matter. The more time a person has until retirement, the larger their advantage in saving enough (more) money. It’s common-sense math. The more time until retirement means more time for saving more money – not to mention more time for compounding of growth to work in your favor. You don’t have to take undue risk with your retirement savings to achieve a fabulous amount of wealth, especially for younger folks. Even starting small can lead to big values.
Most financial advisors can produce a “Hypothetical Illustration.” This report can show how much you can accumulate in your account over the time you have until retirement. These illustrations use the past historical averages of investments contained within your retirement plan’s investment choices. Keep in mind that past results do not necessarily reflect future returns. The longer the time period in the illustration, the more examples you will see of up and down years during the selected time frame. This helps to see how the money you’ve saved and the investments contained in your retirement plan account will fluctuate over time. These illustrations also help open our eyes to the possibility of saving in a way that helps us accumulate substantial and meaningful amounts of money, which ultimately leads to our financially secure retirement.
One last point for those folks who do not have access to a company-sponsored retirement plan: You, too, can save for retirement. The most common type of individual retirement plan is called an Individual Retirement Account, or IRA for short. Self-employed folks, and those without access to a company-sponsored plan, can easily get started on retirement saving. Please speak with your financial advisor during this season of open enrollment and holiday spending. They can help you. If you don’t have a financial advisor, give our office a call. We will be happy to help you get started on your path to financial independence.
Many of my friends will be celebrating important holidays during this fall and winter. Bodhi Day, Posadas Navidenas, Hanukkah, Christmas, Kwanzaa, Diwali, and surely others of which I am not aware. To you and your loved ones, I’m hoping you have a happy and safe fall and winter that is full of celebration and gratitude for our lives here in this time.
-by Ben Smith
Registered Principal, RJFS
313 East 10th Ave. Bowling Green, KY 42101 Phone: 270-846-2656
Contributions to a traditional IRA may be tax-deductible depending on the taxpayer’s income, tax filing status, and other factors. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of the author, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involve risk and you may incur a profit or loss regardless of strategy selected. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decision.
Ben Smith Life Compass Financial is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
