Dear Natalie:
I’m 54 and don’t have any retirement plan… I just started a new job and my employer is offering me a 401k auto deduction of 3% before taxes beginning May 1, if I choose. How do I know if this is the best choice for my money to invest? I have no current investments or retirement accounts......... am 54 years old and need to make some wise safe investment decisions........ Can you please advise?
Signed Better Late Than Never?
Dear Better Late Than Never!
Yes. Read my new book,
You Vs. Wall Street, to learn all of the reasons why, but yes, to 401(k), yes to investing, and, yes, get started right away. Did you know that if you were 18 and you only earned $14 an hour, but put 10% into a 401k religiously, and never got a raise, you’d be a millionaire before you were 50? It’s best to start the investing habit early, but never too late to start doing the right thing! Here’s how it works.
Photo: Stacie Isabella Turk. Ribbonhead.com. (C) 2008 Stylist and Makeup: Arlene Hylton-Campbell.The first year you would contribute $2,890 and your returns would be, on average, $347 (or 12%). The second year, you contribute another $2,890. Your new principal is $6,127. Your gains are $735. By the 6th year, you are making as much in gains as you are contributing each year. By the 10th year, you have over $50,000, and are earning $6,082 in gains that year. This is based upon an average annual return of 12% in stocks, which is what stocks have been doing most of this century. And even if you don’t get those kind of gains (keep reading because this is a consideration), you still have monthly 401(k) contributions going toward your Fund My Dream Life account, instead of poured down the drain of your spending habits.
Now, you might say, stocks are doing terribly and you’re afraid and everyone around you is telling you it’s the Apocalypse and the markets are going to continue to drop! Acckkk! But, you don’t have to lose the money you put in your 401(k). Most plans have a "safe" or at least safer allocation, such as Treasury bills, short-term government bonds or the money markets, which are not invested in the "stock market."
There have been many opportunities over the last ten years to make a lot of money in the stock market, without a lot of time or attention. You do need the "know how," however, which is why it’s important to read my book – because buying and holding mutual funds doesn’t work in a slow growth economy (which we’re in). The last ten years has seen a series of booms and busts, where you could have earned a lot of money if you were 1) properly diversified in ETFs (instead of mutual funds), 2) rebalancing once a year and capturing your gains, and 3) keeping at least a percent equal to your age safe. (If you just bought and held and checked off boxes blindly, you would have lost a little money.)
You need to learn how much to keep safe and how to properly diversify your holdings, so that you easily can see and capture gains each year. Don’t get scared, it’s as easy as a pie chart and that is outlined in my book also (page 91, I believe). For now, just start your 401(k) and put most or all of it in the safest place you can, such as Treasury Bills or a short-term government bond fund.
Get started in the habit of investing in a better life and then make it your job to start learning just four other important things.
1. Get educated so that your money can really gain while you sleep (no fuss, no fret, no babysitting). Reading my book is a great start. Coming to my retreat means that in three days, you’ll set up your retirement blueprint for life! Buy Put Your Money Where Your Heart Is anywhere that books are sold. Get more information on my next Get Rich and Green Retreat on the home page at NataliePace.com. There are only four seats remaining so if you’re interested, call 866.476.7442 right away to reserve your seat.
We have a special on the price now through May 15, 2009. Subscribers receive the Early Bird Pricing and a $2000 gift of a 12-month premium subscription. That way you get the 3-days of education and then ongoing support all year long, in the form of monthly ezine, mid-month update and quarterly teleconferences with me.
2. Ask your employer if they do a match! Many employers do. That’s an instant raise.
3. Figure out how to put 10%, not just 3%, into your retirement plan. If the 401(k) is capped at 3%, then go to an online discount brokerage and find out other tax-protected plans that you might qualify for, including IRAs (SEP, ROTH, traditional), health savings accounts, and more. Tithe to yourself and watch how your Buy My Own Island Plans grow quickly! 401ks, IRAs and health savings accounts all have tax advantages, and at least part of this is money that you would be paying Uncle Sam. So, it’s not more money being spent. It’s a check you write to yourself instead of the IRS at the end of the year.
4. Pick a better name. No one wants to start or grow a retirement account or 401k. Everyone wants to start and nourish his or her Buy My Own Dream House fund or the Send my Grandchildren to College account. Pick a goal of why you want to start earning money while you sleep, and what exactly you will do as you gain more assets! This will inspire you to keep contributing to the plan, maximizing the performance, adjusting as needed for greater gain and then reaping what you profit once you’re ready to purchase one more piece of your dream life!
About Natalie Pace:
Natalie Pace, is the author of
You Vs. Wall Street, host of Naughty Girls' Guide to Sex, Love and Money on BlogTalkRadio.com/Natalie, and CEO of one of the most respected, independently owned financial news corporations in the U.S. She has been ranked as a #1 stock picker from TipsTraders.com and has partnered content with Forbes.com, Sohu.com, Kiplinger’s Personal Finance and more. She has appeared on Fox News, Good Morning America, CNBC, Time Magazine, More Magazine, USA Today, NPR and national radio shows. For more information please visit, http://www.nataliepace.com.
IMPORTANT DISCLAIMER: Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
