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Dreams Don’t Work Unless You Do: 401K, IRAs and CDs, Why Starting Early Matters

August 23, 2018 | TS Prosperity Group

Your late 20s, 30s and even early 40s can often times seem to be far away from retirement. Usually during these years most are busy starting a family, raising a family or working hard toward a dream job or promotion. However, these are the most essential years that set you up for your dream retirement goals.

Dreams Don’t Work Unless You Do
According to Cody Forbush, Investment Portfolio Strategist for the TS Prosperity Group, the first step to achieving your retirement goal is to visualize it. Ask yourself, what do you look forward to when you no longer have to worry about work? Do you aspire to be a snowbird, or do you want to pursue a dream hobby? Even if you plan on catching up on some long-needed sleep, you still need to visualize what you are looking for. Once a goal is visualized, the next step is to set yourself up with the right saving plan to achieve these retirement goals.

Small Changes Lead to Big Differences
Paying off debt can be tough especially with the price of college. Today, young graduates are sometimes acquiring $100,000 in debt before the age of 25. Paying off these huge amounts of debt can sometimes be overwhelming.

Here are a few examples Cody suggests to help you find a few extra dollars in your budget.

  1. Cut back on Starbucks or expensive drink purchases
    Save $3/Day, 7 days/week - $1,095/year
    Invest Savings at 8% for 30 years - $124,000

  2. Pack your lunch
    Save $8/Day vs $2/Day (5 Days/week), $1,560/Year
    Invest Savings at 8% for 30 years - $175,000

  3. Cut back on your frequency of car purchases
    Instead of every 32 months, purchase every 8 years - $15,000/car
    Save $475,000 over a lifetime

For more tips on saving and how to eliminate debt, read The Good, The Bad and The Ugly Kinds of Debt

The Road to Retirement
First and foremost, Cody suggests getting out of bad debt as soon as possible to ensure maximum savings. Once the majority of your debt is paid off, start saving. Cody recommends building savings into your budget, treat it as a debt owed to yourself. Similar to how you pay off a car loan set up a savings account and every time you get paid have a set amount to put away into your retirement savings account.

Next, if your employer offers a retirement plan get enrolled! This is one of the major benefits offered by many employers. It can be rough watching that money subtract from your overall paycheck, but remember your end goal. If your employer matches, that is a bonus! Always make your contribution match your employer’s for a max return, Cody also suggests upping your contribution every year or with every promotion. This will make the amount removed from your paycheck easier to handle and most likely unnoticeable. 

Once you have your debt at bay and you are enrolled in your employer’s plan, Cody says to diversify your assets. Each individual has a unique situation and careful planning will help decide where would be the most beneficial places to save. Here is a list of other retirement vehicles one can use to diversify:

Before Tax Vehicles – Contributions are tax deductible, growth is tax deferred, and distributions are taxed:

  • Traditional 401(k) - employer sponsored plan
  • Traditional IRA – individually sponsored
  • SIMPLE IRA – used for small business
  • SEP IRA – used for self–employed individuals
  • Traditional 403(b) – Non-profit sponsored plan
  • Thrift Savings Plans – government sponsored plan

After Tax Vehicles – Contributions are taxed upfront, growth is tax free, and distributions are tax free (as long as certain criteria is met):

  • Roth 401(K) – employer sponsored plan
  • Roth IRA – individually sponsored
  • Roth Thrift savings plans – government sponsored plan
  • Roth 403(b) – Non-profit sponsored plan

Also, a good rule of practice with investing is to never keep all of your eggs in one basket, so to speak, in case one market were to crash. When your money is diversified or “split up” if one of the markets you are invested in crashes, you don’t have to worry about all of your money disappearing. An important part of diversifying is to have investments that do not act similar; when one goes down, another one goes up.

One more tip Cody suggests when investing, is to purchase assets that are appreciating and not depreciating. An example of this is a car purchases versus a land purchases. Land typically will hold value and even gain value over time, where in comparison a car will typically lose value the older it gets. Surround yourself with assets, not liabilities.

At TS Prosperity Group, we IGNITE PROSPERITY® by helping our clients do more with their money. Whether it’s saving a little extra cash each month or accomplishing a long-term strategy, our goal is to help you transform your financial life. Call and schedule an appointment today, one of our team members would love to help you do more with your money at TS Prosperity Group. TS Prosperity Group is based in Council Bluffs, Iowa, with clients across the midwest. For more information visit tsprosperitygroup.com or call 844-487-3115. #igniteprosperity