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My Financial Wake Up Call….It Is Never Too Late

Quite often we go out in search of the solution to a problem, but instead we find answers to questions we did not know we had. Questions we never asked, but should have.  What we find instead leads us down a path we never imagined.

For the better.

One day at work, some of us were discussing our upcoming family vacation plans. A comment from one of my co-workers intrigued me; not where they were going, but how his tax-refund would pay for their entire trip. They were not going around the world, but airfare and a nice hotel stay were included. I wondered how he managed to pull it off, and cornered him into telling me how he had pulled it off. He went on to tell me about the “new” saving for retirement tool he found at work, the 401K. He meant new to him as he started contributing early that year. Many of us joined the club.

A co-worker simply shared the knowledge and star was born.

His tax burden the previous years had always been huge so he had adjusted his withholding tax to more or less equal his total payment.  This way there was no hefty payment when the tax cometh. The key to his large refund was the fact that he maxed out the contribution to his 401K, but never adjusted the withholding. These tax benefits were designed to incentivize and encourage us to save for retirement. You will have to pay taxes eventually, but not until you retire.

The withdrawals will be considered ordinary income and be taxed as such. I contributed only enough to get the company match and nothing more.  All that money, the potential earnings…lost.  I made the necessary adjustments. The IRS has capped the contributions at $18,000.  If you are 50 or older, that number jumps to $24,000. This total does not include any company match that may be given.  These are capped as well. By the numbers, $18,000 a year  equates to $1,500 a month, or $346 a week.

That company match is free money. Take it.

For most of us $18,000 a year is unrealistic, but do not get discouraged because small savings over time do add up. Take a look at what you can end up with by saving little more than three dollars a day by reading  Your Pennies Do Count. I think it is a worthwhile read.

Imagine how much larger your nest egg will be if you increase your contributions with every raise or promotion you obtain. Goes without saying increase your contributions whenever possible!

Your employer does not offer a retirement plan;  set up your retirement plan in the form of an IRA. There are many available. Search them out yourself; they are out there.  Find the one that is right for you. Most require an initial investment, minimum balances, and/or periodic reinvestments, but can be easily created.

Do not have much to start, you can open up an account I chose to invest in a low-cost index fund and took a “buy it and forget it” approach, at least for now.  I will not be using that money in the short term and will leave it there until my retirement. There to ride the ups and downs of the stock market.

Many people do until It see the advantages that retirement funds present both now and in the future. Hopefully you just did. Don’t delay, get started today. Your future self will be eternally grateful.

For more related articles visit and subscribe to The Financial Independent One.  Share with someone that can use this little nugget of information.

I am not a financial advisor and hold no fancy degree and as such this is not financial advice. This is simply what I have done and recommend my children do when the time comes.

Written by javier

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