So What Is So Urgent About My 401k Options?

Unfortunately, in the minds of most 401k plan participants, there is no sense of urgency about their 401k options. I believe this company benefit is the ultimate “tomorrow” issue. Perhaps it is not until we are within a few years of retirement that we begin to see this as an urgent issue. Maybe the urgency reaches a fever pitch when we focus on how we are going to stretch our savings out over twenty-five or thirty years of retirement.

One study I saw recently suggested that only one in five people are saving enough to successfully retire by age 65. How is it that so many of us think we have plenty of time to deal with retirement planning? What was that fairy tale? The Ant and the Grasshopper!  If sloth is your problem there is nothing I can say to alter your behavior; but, if it is only fear, cleverly disguised as denial or immunity from aging, there is certainly help.

Most of us will admit that we need to plan for retirement but there is a resistance to begin the process. What you should know is that this is a process rather than an event. There is no possibility of making a single drastic, ultimate mistake at the start, before we are anywhere near retirement age ~ other than not beginning at all.

If you have somehow come to believe that you cannot start because you need to pick the right mutual funds or other investment products in order to successfully retire at age 65, you would be misinformed. The single greatest factor in achieving a successful investment outcome for retirement is maintaining a plan of consistent savings. What is worth more to you: A 100% return on $1,000 or a 5% return on $200,000?! Investment returns are not the real driver for wealth creation.

The 401k Plan is the simplest platform for you to execute something entirely within your control today, regardless of your financial education ~ saving. If you are obsessed with investment returns and your employer only matches one quarter of your contribution that is a 25% return with no risk!  Do not pass that up!  If you need yet another incentive, how about reducing your current tax liability? Your contributions come out of your pay check before tax, so your current tax liability will be smaller than if you did not participate in your plan.

The next step to take is to take personal responsibility. Yes, you and you alone are now responsible for saving and investing for retirement. There is no escaping that reality. If you maintain your systems of denial the only consequence will be that retirement at age 65 will simply not be affordable because you will most likely outlive your money. How would you feel about having to work until age 75?

Contribute as much money to your Plan as you can. Increase your savings amount as your salary increases. Study your 401k options and keep up with changes to your plan. Learn tactical asset allocation strategies. Monitor your nest egg. Recognize where you need help ~ and ask for it. You can do this.