Flossing Your Teeth
My father was a dentist. Far too often, patients would always ask him “Do I really need to floss my teeth?” He had a very simple response to this question: “Only floss the teeth you wish to keep.” Good answer, don’t you think? Flossing is a choice – you either choose to take the time and attend to your dental health or face the consequences. Flossing requires action on your part, and it is not quick and easy. Finally, the benefits are not really seen right away but accrue over the years. Remember, a healthier mouth leads to a healthier life.
I bring this up at this time of year because I am frequently getting a similar question, albeit related to financial health and well-being: Should I be funding my retirement account? Sometimes, this question comes from a younger client who is entering a 401K plan for the first time. But I also hear this question from folks in their later working years (i.e. my age…but we’re not old!!). Seems like these folks think since they have nice 401K balances and/or solid IRA accounts that continuing to fund their retirement account is unnecessary. I’ve decided my new response to this question will be: “Only fund your retirement account if you wish to retire.” Let me elaborate.
Today, retirement accounts come in a variety of alternatives. That’s good because very few companies offer retirement pensions any more. 401K is the biggest of the bunch, but 403B, SEP, Simple Plan, and plain old IRA accounts (both regular and Roth versions) are part of the menu available to investors. Supplemental plans (such as those offered at many educational institutions) are a second set of possibilities to set aside money for retirement. There are other less widely used retirement vehicles in the marketplace. But you get my point. There are a multitude of ways for people to invest money NOW for their retirement.
Then why is the average investor woefully underinvesting? An Economic Policy Institute report indicated that the average American age 32-61 (prime working years) had $95,766 invested for their retirement. You and I both know that this average includes younger workers, but breaking out only those in the age 55-61 group (and that would be my age group) shows an average of $163,577. That is not enough. Period. It is not even close!
There are too many variables that go into calculating the “right amount” to be putting away for your retirement. Age is the single biggest influence, as the power of compounding is the most powerful method to accumulate retirement wealth. Let’s boil it down to this: The younger you start, the better off you are. I have told many newly employed to “put away 10% because you won’t miss it.” How can they miss something they’ve never had?
For older clients, I strongly suggest maxing out whatever retirement options are being offered. Having more than enough socked away in retirement accounts increases your ability to determine how and when you retire. I don’t have rules of thumb to share with you, just lots of experience working with people and helping them make these very personal choices. Take action now to assure a happier, healthier, and more secure retirement. And floss your teeth!
Ralph McDevitt
January 30, 2018
Keep in mind investing always involves risk and you may incur a profit or loss. Past performance is not indicative of future results. No investment strategy can guarantee success.
