Investing for Your Retirement

Why work Monday - Friday, 40 hours a week? Hopefully, it is because you are putting in hours that are getting you closer to that golden age of retirement, so you can finally quit that J.O.B.

When you become close to retirement age, it is important to have something to retire on. For most people, the income from Social Security is not going to be enough money to provide all life necessities. Therefore, it is important to start putting money into a deferred compensation program, which offers pre-tax supplemental retirement plans. Depending on your job, the deferred compensation program can go by many other names, but for the most part, it is your company's 401 (k) or 457 plan. Both plans are voluntary, long-term investment choices that will support your pension, or social security benefits.

WHY YOU NEED TO JOIN

401 (k) programs provide additional retirement income, offer automatic payroll deductions, and allows for a variety of investment choices. This is important because experts predict that you will need 75% or more of your current annual income to maintain your present lifestyle when you retire. However, investing in a deferred compensation program will help you meet your financial goals and plans for retirement.

THE MYTH ABOUT INVESTING IN A 401(K)

1) Only People Who Make A Lot of Money Can Afford Investing in a 401(K)

In most cases, employees can invest as little as *$50 a month to their plan. By investing in your retirement plan, you are being tax less. Therefore, the actual decrease in your check will only be $38. Just by investing $38/mo. in 30 years your 401 (k) will have made around $70,000. A lot of us spend $38 a month on coffee, snacks, and other miscellaneous things we can go without, however, if you invest that $38 you will be allowing yourself to meet your retirement goals.

At anytime you can change the amount you are investing in your plan. Typically, when you get a raise or a promotion you want to increase the amount you are putting in your 401(k) plan. For example, if you increase your amount from $50 to $100, your actual deduction will only be $75. In 30 years, investing $75/mo. will have made around $140,000. If you choose not to invest in your 401 (k) plan, you are making a statement. That statement is that you do not need extra money, and in reality who does not need extra money?

HOW a 401(K) CAN HELP

Many plans allow employees to take money out of their plan to buy a house, or if there is financial hardship. In addition, you can start taking money out after the age of 55 without penalty. Enrolling in a plan can also be helpful, because you get the ability to roll unused vacation time into your deferred compensation account.

HOW TO ENROLL

Contact your company's human resource department, and ask about the plans available. Decide how much money to invest and complete the Enrollment Agreement. Once you complete the agreement, you will receive an information kit in the mail. Review the materials and complete the enclosed beneficiary designation. Next, you have to pick an investment strategy; this is done by completing a questionnaire.

Some employer's match employee's contributions to their 401 (k) plan, so it is very important to contact your human resource agent to obtain more information. If you are working, you are never too young or too old to start investing for retirement. A small increase can make a big impact in your future.

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