Save and Utilize Employer Matches to Get to Retirement
Transcript:
Katie Nealis:
I’m 24 and I have zero retirement, how can I get on the fast track to a successful retirement?
Tom Vaughan:
Well, as I mentioned, most people save most of their retirement money from 55 to 65. So, if I forgot the stat, it’s really high, it’s like 80% of money saved for retirement is, is in that the last 10 years, you know, people are motivated, and maybe their kids are out of college, you know, those types of things. So it’s a good time, you know, they’re making more money. So asking at 24 is a really, it’s great. I mean, honestly, just because you’re asking that question, you’re probably going to be pretty successful. That’s a good, that’s a great start problem, because not enough people ask, they are not enough people care. So I would say, Kiley, that the first place to start is a financial plan. Because again, these are fairly simple things to do. Even if you don’t have assets. It’s not about the assets, what the plan can show you is what you need to save to reach the goals that you have. What’s your vision for your retirement? What age are you? What are you doing? Let’s guesstimate what that would cost in today’s dollars? And then let’s go backwards and say, okay, based on, you know, a portfolio that would meet your particular risk needs, what do you need to save? Does that make sense? Is that even possible? How would you do that?
And what it does is just gives you motivation to fast track to retirement starts with motivation, you’re not going to you know, I that’s true with a lot of things, right? I mean, if you’re trying to lose weight, it’s sometimes really motivated to see other people that have done it, right. So if you have a plan, and you have a picture in your mind, and I always encourage people, you know, at that age to actually get pictures, I mean, I have pictures all around my mirror, this house that you’re sitting in, that I’m sitting in here, that you’re looking at was created out of a picture that was next to my, you know, mirror so that I think it starts with motivation. And that’s where the financial plan can really, really help. And so that that would be the fast track that I would think about is say, you know, because you don’t really know, I mean, I put away $50 $100, you know, I mean, I know what I can afford, but what should I be doing? And and then how much should I be increasing that each year? And should I be using a Roth IRA or a regular IRA or 401k? Or, you know, those are things you can answer in the financial plan and test out and see which one would work best for you. And such, too. So, yeah, that’s that that starts with a plan, create the motivation.
Easan Arulanantham:
Yeah, but even you if you don’t have the time to create a plan, so if your company has some sort of match, trying to utilize that. If they’re giving you 3% match for that year, 3% of your income, like 100% match. That’s a free 3% return or 100% return on that money already.
Tom Vaughan:
Yeah. And so trying to utilize match, if you don’t have any idea what you’re doing matches is really key. It’s a big deal. It’s amazing to me how many people don’t do the match. Because if they’re going to give you 3%, somebody will say, Oh, I can’t afford to do the 3% Well, honestly, even if you just did it and take the money out, pay the penalty in the taxes, it’s free money, I wouldn’t do that. But it got to think about the s&p 500 averages about you know, let’s just make up a number here. 10% a year. So you know, it’s a little higher than that. But we’ll say 10 if you’re putting in 3% of your salary, and they’re putting in 3% of salary, you just made 100%. And in order to make 10% and the s&p 500 you’re having to go through all kinds of ups and downs, and you know, you know, pandemics and all these things, you’re getting 100% for your company for no risk. That’s how you create wealth. I would definitely be looking if you have some of these matches are ridiculous. And we’re kind of case right now with a match that’s at 50%. And then you know, we have companies here in, in, in the valley and Silicon Valley here that are you know, will match every dollar you put in there. 100% on a max. Wha that’s a huge huge number. So yeah, that’s that’s definitely it’s good point. It’s an even if without a plan, just you know if you can do the match piece if it’s available, that would be awesome.