Are you Making this Mistake
Every Time You Get Paid?

What happens to your money when you get paid?

If you’re a W-2 employee, the government’s already gotten their chunk of change. You get to decide what to do with the rest.

If you’re like most Americans, everything else goes to paying bills and living expenses. Hopefully you have a little something left over after taking care of everything.

If you’re ready to ramp up your money strategy and get the most out of every paycheck, there’s something you should definitely be doing each pay period.

It can help you lower your taxes, and save for that beach house you’re dreaming of in retirement.

Contribute to your company’s 401k up to the full match.

Here’s why.

Your company’s 401k is a tax-deferred retirement account that allows you to invest with pre-tax dollars. By contributing over the course of your career, you get quite a few benefits:

Tax-deferred growth of your money: Since you use pre-tax dollars to invest in your 401k, your dollars get to compound for years before you have to pay taxes on them.

The magical 401k match: Most companies offer to match funds contributed to you 401k, up to a certain percentage of your pay. That is FREE MONEY. Depending on your match, you “make” a 50-125% return on that money just by putting it in the 401k account.

What does that mean? You have more money to invest because the company chips in.

Once the money vests (which happens automatically after you work for the company for a certain amount of time), it’s officially yours.

The 401k tax deduction: You can contribute a maximum of $20,500 to your 401k each year (as of 2022).

If you’re a high income earner, this strategy could save your nearly $6,000 at tax time. Be sure you are contributing to a traditional 401k; the same tax rules don’t apply to a Roth 401k.

Feel Like You Can’t Afford It? Do It Anyway.

If you haven’t been contributing because you feel you can’t afford it, now’s the time to switch up that thinking.

Can you afford to miss out on the company’s match? It’s a job “perk” that was created to encourage Americans to save for retirement. Since pensions are a thing of the past, it’s about as good as it’s gonna get. Money that you don’t have to do any extra work for? Get yours!

Get Over Your FOLM (Fear of Losing Money)

If you’re risk averse, the thought of investing – and losing – your hard-earned ash is probably making you queasy. Feel that fear and do it anyway! This is your future we’re talking about.

The market naturally ebbs and flows, but the overall picture is good. Despite some significant down years, the US Stock market has created an average annual return of nearly 10% per year.

That mean if you invest for the long-term, you’re likely to land in the green.

The thought of investing still giving you anxiety? Your 401k gives you access to some “set it and forget it” options. You can choose a target date fund based on your age and expected date of retirement. Your 401k plan’s broker team has already done the work of choosing investments for you.

If you choose this type of strategy, be sure to check your investment’s performance at least once per year.

If you’d rather have more control over where your money goes, there’s a solution for that, too. One option the Oracle of Omaha recommends is low-cost index funds.

They might not seem sexy, but they’re effective. You can invest and get on with your life.

What to Do if Your Company Doesn’t Have a 401k Plan

If your employer doesn’t offer a 401k plan, you should still be contributing money toward your retirement somewhere. You can check out other investment vehicles like a traditional or Roth IRA. Each one has different rules, so be sure to read up and decide which one is best for you.

Whether you contribute to a 401k at work, or choose another option, you should get started NOW.

You’re 17 and reading this? Doesn’t matter; today’s the day.

Just turned 46, and think it’s too late? Read that last sentence again.

The most important key to investing for wealth in retirement is time. You can’t time the market, so the next best option is to give your money as much time as possible to grow.

The longer you’re invested, the more time it has to compound (through reinvestment), and recover if you take a loss.

Promise yourself you’ll never get another paycheck and not put something away. Once you give your dollars a job, they’ll grow and serve you for years to come.

Wrapping Up

Have you started contributing to a retirement plan? What’s your investment strategy when it comes to funding your retirement? Share your thoughts in the comments below.