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Building Wealth – Retirement Planning

Mark’s Market Update – 9/23/2021

When I graduated from High School…my father wasn’t the smartest guy when compared to me.  

When I graduated from college, I was amazed at how much he had managed to learn in four (alright, maybe five if I’m being honest with myself) short years…

All parents want to do is have their kids not repeat any mistakes they made and are applying wisdom and experience to those life lessons. Kids? Well – their parents are just stupid.  

So, one of the first pieces of advice I took from my newly-minted “smart” father (who happened to also be a financial planner) with my first real job at First Security Bank – was to start contributing to my 401(k) plan.  

I also followed his advice and started contributing more and more and more. 

Since then – a quarter-century later, let’s just say that I like the balance in my 401(k). Like…really like it. A lot.  

But, it might have been different if I didn’t have profoundly smart people influencing my decision-making. My father, my mother, my mortgage coaches in the CORE – and Rick Ruby – probably one of the smartest people I’ve met when it comes to sales and money…which is why he is better at sales than me and has more money than me. Go figure.  

We’ve talked about the first two steps: Buy a home (step 1) and save $25,000 in liquid reserves as “protection money” (step 2). 

Now, it’s time for Step 3 – Retirement planning.  

It’s not rocket science. If you work for a company that offers a 401(k) – and most of us do – you HAVE to contribute to it. Must. It’s not negotiable for your future. Don’t contribute when you “get around to it” – or, “there will be time for this later – but right now, I really need to focus on this, instead” (whatever “this” is). Start…now. Time is on your side…but time becomes your worst enemy in the future.  

  • Rule #1 with 401(k)’s – if they match anything – you contribute, immediately the maximum you can contribute to maximize their matching. This is FREE money. It is a guaranteed rate of return on your investment of 50 to 100%…! Only Bernie Madoff can come up with a better rate of return…. 
  • Rule #2 with 401(k)’s – find out how long you have to stay with your company for the matching money to VEST…and then, please – stay with the company for that period of time at a minimum.  
  • Rule #3 with 401(k)’s – once you’ve hit the percentage of contribution where you’ve capped out what the company will match…then, every 3 months, increase your contribution by 1%.   
  • Finally – Rule #4 with 401(k)’s – when you change jobs (and you probably will at some point) roll it over into an IRA with your financial planner. That’s the holding bucket where ALL of your 401(k)’s over time get dumped into. Don’t ever, and I mean EVER liquidate a 401(k) or cash it out.  

The maximum you can contribute to a 401(k) is $20,000 per year. If you’re over 50 (like me) – you get to contribute $27,000/year. If your company doesn’t have a 401(k) or you’re self-employed – then you want to start a regular IRA or Simplified Employee Pension. 

Follow my advice, just like I followed my father’s advice. Parents are, actually pretty smart, even though you thought they were knuckleheads when you were younger.