There’s a ton of free money out there for the taking, and it’s there for the folks who never seem to get anything free – the folks who are out there working and paying taxes.
But based on the numbers, Mr. Average Working Guy doesn’t want the money.[ad#Google Adsense 336×280-IA]It’s the matching amount your employer gives you in your 401(k).
The employer matching amount from most 401(k)s is virtually the same thing our parents had in their pension plans. But you’ve got to participate to get this freebie.
A full one-third of workers do not take advantage of the plans. And that means billions – I mean, billions – of free dollars are being flushed down the toilet every year.
Not only that, but let’s say your company will give you 3% if you contribute 3% of your pretax income. That’s an immediate 100% return on your money, guaranteed.
And 3% is at the low end of what most employers match. Some are as high as 8% and 10%.
A 100% return on your money and an immediate reduction in your income taxes! Yes, your taxable income drops by the percentage that you contribute.
Your money also then grows tax-deferred. And the more you contribute, the lower your taxes.
Add up the reduced income taxes, the savings on no capital gains or taxes on interest earned, and anywhere from 3% to 8% matched by your employer over a 35-year working life.
Now, I know this is not brain surgery. Most of you know how a 401(k) works. But here’s the problem.
Even the ones who do participate only contribute the minimum required to get the matching funds.
You can fund your retirement, lower your taxes, have your money available as a loan if an emergency arises – actually, most use that loan feature to borrow their own money as a down payment on a house – and you don’t pay any taxes on the interest earned or the growth until you withdraw it.
Your money grows tax-free. Yet, most will ignore the facts and still end up relying on Social Security for their retirement income.
When you look at the retirement funding mess the boomers are in and the worsening situation the next generation will be in because most boomers failed to properly fund their retirements, giving away this free money is criminal.
Just a 3% deduction per year for a $70,000 income over 35 years with just a 3% return will give you over a quarter of a million dollars. The average 50-year-old in this country has only about $40,000 saved for retirement.
We’ve got to do something to turn the tide on the retirement problems we’re facing. Reducing income taxes, growing your money tax-free and free money seems like a pretty painless way to start. Add a 100% return on just the minimum, and it’s almost too good to be true. It’s a true no-brainer.
Get real, folks. If you aren’t fully funding your 401(k), you’re burning free money. And that is criminal.
— Steve McDonald[ad#DTA-10%]
Source: Wealthy Retirement