As a Generation-Xer, the last thing on your mind may be your retirement. The age at which you can retire is decades away and the age-old saying “out of sight, out of mind” may be your current theory on your savings. Contributing to an employer’s 401(k) plan could be the single most important factor in preparing for your future, even if that future is years away.
If your company offers a 401(k), join the plan as soon as
you become eligible. Some companies may allow you to join upon hiring, but some
require a wait time. Not only should you join, you also need to contribute to
your 401(k). Find out if your company matches a certain percentage of your
contribution and try to contribute at least that much, if not more.
Not everyone is eligible for participation in a 401(k), but that
doesn’t mean there aren’t other options for you. If you are self-employed, you
can establish and contribute to a SEP-IRA or SIMPLE IRA. You may also qualify
to contribute to a Traditional IRA or Roth IRA.
You may have questions about what is more important to pay
first – your debt payments or your retirement fund? If you have student loans
you shouldn’t sacrifice 401(k) plan savings to make extra principal payments.
However, if you have multiple student loans, consolidating these into one loan
payment to free up cash flow to contribute to your 401(k) is a viable option.
If you are facing credit card debt, you should contribute your employer’s
maximum matching amount until your credit card debit is resolved, then increase
your 401(k) contributions.
Some experts say you should contribute a total of 13-15% of
your pay every year to your 401(k) if you are planning on working and saving
for retirement for 30 years and are planning on your 401(k) and Social Security
being your primary source of retirement income.
So while you aren’t thinking about retirement now, planning
for retirement now is important. If you have any questions regarding your
retirement options, don’t hesitate to contact Founders Investment Services.
Relax...you’re with Founders!
This article was written by Kelly Potts. It was published in Founders FCU Transaction Newletter (January 2013).