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10 Steps to Save Your Retirement
by Lawrence Groves
Published on this site: April 20th, 2006 - See
more articles from this month
Many of the brightest and hardest-working marketing and advertising
people in the country are obsessed with getting you to spend
money and, if necessary, to go into debt to do so. Absolutely
all the media that reach you every day are designed to get
you to spend money. In order to save money in this environment,
you will need determination to withstand the constant pressures
to spend now.
What is it that separates the successful from those who are
not?
Successful individuals have a strong personal vision of what
they want and why they want it. That vision gives them the
strength to stick to their strategies even when doing so is
uncomfortable. It gives them the determination to persist
when they are discouraged. This is the same characteristic
of women entrepreneurs and is the reason their new, small
businesses are successful.
The 401k Plan
Today, the 401(k) plan has become the main investment
vehicle for working women to save for retirement. But many
don't take full advantage of their plan, and this could leave
them with a lot less at retirement. Here are some steps we
believe you can take to improve and eliminate any retirement
worries about whether or not your retirement will be pleasurable
or public charity; or whether you will have all the free time
to spend with your family or friends
- Increase your contributions to the maximum that you can
manage. Many women contribute just enough to take advantage
of their employer's matching contributions, and then they
stop. By adding more to your account, beyond the matching
contributions, you'll end up with more in retirement.
- Invest at the start of each year instead of taking a little
bit out of each paycheck. Nothing in the law says you have
to invest in a 401(k) plan a little at a time, from each
paycheck. By investing early, you'll put your money to work
sooner for your benefit.
- A few years ago it was reported that more than 30 percent
of the money in 401(k) plans was invested in money-market
funds or similar accounts. For investors nearing retirement,
that may be appropriate. But most workers in their 40's
and 50's need growth in their retirement investments. Put
more of your investment fund in equities and less in money-market
funds.
- Research indicates that over long periods of time, small-company
stocks outperform large-company stocks. Since 1926, In he
equity part of your portfolio, shift some of your money
into funds that invest in small companies. Don't put your
entire equity portfolio in small-company stocks. But consider
investing at least 25 percent of your U.S. equity investments
in that fund.
- Numerous studies have shown that value stocks outperform
growth stocks. According to data going back to 1964, large
U.S. value companies had a compound rate of return of 15.1
percent vs. only 11.4 percent for large U.S. growth companies.
Among small U.S. companies, the difference was even more
striking: a compound return of 17.4 percent for the value
stocks vs. 12.1 percent for the growth stocks. Don't put
your entire equity portfolio into value stocks. But if there's a value fund available to you,
consider investing at least 25 percent of your U.S. equity
investments in that fund.
- Rebalance your portfolio once a year. Your asset allocation
plan calls for a certain percentage to be invested in each
of several kinds of assets. Rebalancing restores your asset
balance and allows for the possibility that last year's
losers may be this year's gainers. Diluting your diversification
actually increases risk in your portfolio over time, which
is a result that's just the opposite of what most investors
want.
- Without compromising proper asset allocation - use the
funds in your plan that have the lowest operating expenses.
Choose funds with low turnover in their portfolios
- Don't borrow or make early withdrawals from your 401(k)
unless that is the only way to respond to a life-threatening
emergency. Furthermore, if you take an early withdrawal
before you are 59.5 years old, your withdrawals will be
subject to a 10 percent tax penalty (in addition to regular
taxes) unless you are disabled. Just don't do it.
- If you leave your job, you'll get a chance to roll over
your 401(k) into an IRA. Take that chance. In an IRA, you
have the same tax deferral as a 401(k), and you'll have
the flexibility to invest in virtually everything you can
get in a 401(k), plus much more.
- Here's the most important thing you can do to maximize
your 401(k): Keep your contributions automatically payroll
deducted, and make them no matter what. It's simple, but
it's not easy. Half of the households in the United States
have net worth of $25,000 or less. In a typical year, about
two-thirds of U.S. households do not save money.
Remember, to be successful, first, imagine your early retirement;
the Caribbean condo, the yacht, the new Lexus. Luxury and
pleasure as far as your eyes can see. Create a strong vision,
and then don't let go. The power of a clear, strong vision
applies to more than just your retirement savings. Let your
vision shape your life, instead of the other way around, and all of the
time in the world can be yours. You won't be spending your
Golden Years working at the Golden Arches.
Lawrence Groves is the Director of Solo 401k Retirement
Administration Services for the Retirement Group. A nationally
recognized author and retirement plan expert with over 25
years of plan design, administration, and compliance experience.
Visit http://www.solo-k.com/wst_page3.php
or http://www.womensolok.com
Contact Lawrence at [email protected]
or call 727-277-4137
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