Setting up and evaluating your retirement accounts

Investing, Retirement Planning

This is one in a series of 10 posts to help you get, and remain, financially healthy. It’s best to start at this post. [click here]

Okay, so far we’ve calculated your Net Worth, built a Statement of Cash Flow, plugged those spending holes, created a debt management plan, created a plan to build an emergency and sinking fund, pulled free credit reports, and evaluated risks. What’s next?

Going back to your cash flow statement, debt management plan, and emergency/sinking fund plan, if you see where you have enough cash flow left over then it’s time to Invest Your Money!

Where should you start…? Start with your employer plan (e.g., 401K, 403b, etc). If you do not have a company sponsored plan then you need to look at IRA options. For personal accounts you have two; the Traditional IRA and the Roth IRA.

If you’re self-employed then you’ve got several options. Get with a financial professional and ask about SEP-IRA’s, solo-401K plans, or Simple IRA’s. The sooner you set one of these up and running the sooner you can start building that retirement nest egg.

For those of you who are employees and have a 401k or a 403b at work, get with your Human Resources department and find out about your plan. How much will the company match? If your company matches any amount that you put into your own account and you are not taking advantage of the plan you might as well be leaving money on the table.

It goes like this; let’s say you make $75,000 each year and you have a 401k at work and the company will match .50¢ for every $1.00 you put in up to 6% of your income. If you put in 0% the company puts in zilch, nada, $0.00.

But let’s say you put in 3% of your income, $2,250. Then your company will match it .50¢ for each dollar, this equals $1,125. That’s a lot of dough when you add it up over the years. So, in this case, for every dollar you invest of your income into the 401k plan under the 6% you are leaving money on the table. For Pete’s sake, take the free money.

Now I don’t know what your plan offers but check it out. Learn what benefits you have so you’re not throwing potential money out the window.

Next we’re going to tackle those unruly credit cards.