Dreaming of Financial Security?
Do you fantasize about winning the lottery and living the life of your dreams with no financial worries? While the odds are against you for winning the lottery, there is a realistic way to work toward financial security. By participating in your company's retirement plan, you are taking positive steps toward accumulating the money you'll need to have a comfortable retirement.
A Dollar and a Dream
Paula spends over $20 on the lottery every week. She is convinced that someday she will hit the jackpot, become a millionaire, and retire to Fiji. But after playing for many years, she has never won a dime. Paula contributes only 5% of her $25,000 salary to her retirement plan. While it's good that Paula is contributing something to her retirement plan, imagine if she also invested the money she usually spends on the lottery in her plan account.
Playing to Win
If Paula continues contributing only 5% of her salary -$1,250 -- to her company's retirement plan, she will accumulate $155,251 in 30 years at an 8% average annual total return (compounded monthly). However, if Paula stops playing the lottery and instead contributes $100 more a month to her retirement plan, her total annual contribution would increase to $2,450. After 30 years at an 8% average annual total return, she will have accumulated $304,287 in her account. An extra $149,036 is a lot better than a pile of losing lottery tickets. And, when she retires, Paula probably could afford to enjoy a long vacation on a tropical island.
A Win/Win Situation
Your company's retirement plan is more convenient and flexible than any game of chance. Plus, it reduces your taxes, which truly makes it a win/win situation.
Saving through your company's retirement plan is convenient because your contributions are automatically deducted from your paycheck. Your decision to save for retirement needs to be made only once, and, since you never see the money you contribute, you aren't even tempted to spend it.
Most plans are flexible, allowing you to decide how much to contribute and select which investments complement your needs and goals. As time goes on, you may decide to increase your contribution or adjust your investment mix. Your retirement plan is designed to meet your changing needs.
Best of all, your company's retirement plan saves you taxes. You pay no current federal income taxes on your plan contributions. As an added bonus, the income earned in your plan isn't currently taxed either. Taxes will be due once you retire and start using the money (or if you receive an earlier distribution). In the meantime, however, the benefit of tax-deferred compounding could help your retirement savings grow at a much faster rate than they would in a taxable account.
Your Retirement Plan Is a Winner
Next time you consider playing the lottery, remember that you don't have to win the lottery to gain financial security. In fact, the odds of being a winner are much better with your company's retirement plan. Saving with your company's retirement plan for many years can help you achieve the retirement of your dreams.
The information above is provided as a service by #1 Insurance Quotes Life Disability Insurance. Protecting your personal and financial security is important to us. Contributing to your empolyer's retirement plan is only one of the many financial tools that can be used to help you meet your retirement needs. A #1 Insurance Quotes Life Disability Insurance Representative, working in conjunction with your other professional advisors, can be instrumental in helping you plan for the best financial future for your family. Please contact us if you have any questions or are in need of planning assistance.