Retirement is the time when you stop working completely or reduce work hours to the point it becomes a minor part of life. What factors should be considered when planning for the golden age?
When we got our first good job, HR asked if we would be investing towards retirement. We started to get a faint understanding of the concept of “retirement”. As young adults, we inevitably were led into company-based 401(k) programs with little understanding of what it meant, where to invest, and what a “good” return looked like.
As real-live grownups with mortgages, kids, college tuition to plan for, and the inevitable desire to have nice things, what does that mean for your retirement? What about missed tax filings or owing the IRS back taxes?
The pensions and sale of the family home that our grandparents used to fund their retirements are long gone and despite the enviable run the S&P 500 has put on in the last three decades, the facts remain – you probably don’t have enough to retire and unless you change some things fast, you will work long past the age of 70.
How can you fix that?
It starts with changing your relationship with money. More importantly, it can’t start until you change your relationship with debt and credit. IRS debt is the worst. The IRS can force you to sell your retirement portfolio if you fail to settle with them.
Now, I’m not going to start ranting about credit cards and HELOCs, but if you have thousands of dollars in unsecured debt (read that “credit cards”) then you need to lower those balances actively. No, that doesn’t mean cut up the cards and close the accounts. That means pay the balances down and train yourself to be disciplined to pay cash for anything that cannot make you money – Big Screen TV….. Pay Cash. Computer for the business…. Use Credit. New Refrigerator ? ?.
How does this help you retire? Well, when you aren’t paying hundreds or thousands of dollars each month in penalties and interest, you can put that money into investments like a 401(k), a Roth IRA (or a traditional), or even paying down the note on your home. All these conspire to put more money into play for buying (or saving) for retirement. It’s worth remembering that if you are only invested in a single 401(k), that particular portfolio needs to be diversified – don’t dump it all into your company (remember Enron?) or an industry (oil, for example). Consider broad based index mutual funds as a low cost option for the novice investor who wishes to take part in economic growth of the markets.
Now, this is going to sound petty, but you need to take charge of your retirement. Sure, some folks have account managers if their portfolios are big enough, but for most people? They’re picking it themselves. It’s a well-documented fact that many of the “financial advisors” open for business make well under $100K a year. Why would you ever think of using their knowledge to invest your money? If they are that good, shouldn’t they be wealthy?
It pays to shop around!
The important thing to remember is this: you have a myriad of opportunities to save money, be it in stocks, bonds, real estate, or mutual funds. The information is out there and you have the world at your fingertips – take some time away from Facebook and point your computer to sites that can educate you on how to invest wisely (and here’s a good rule of thumb – if the website doesn’t have loads of free content but continues to ask you to “buy” something, find a better website to continue your education). I love Vanguard.com for this very reason. Think through a strategy that can begin to allow you to invest and then, come in and join us to discuss what those investments could provide write offs or deductions in taxes (leading, of course, to further capital to invest!).
You have a decision to make – do you want to retire at 65 or 75? The choice is incumbent on you today, not tomorrow.
Remember, my office is open to you and your family when you have IRS issues that need to be resolved. IRS is some of the most expensive debt that a person or business can face during your lifetime. Penalties, interest and interest on the penalties are detrements to considering a secure retirement. I’m willing to bet that even coming by for a quick meeting could result in some new strategies to save, whether you have experienced an issue or not! To review your irs notices, please get in touch with New Life Tax Resolution. Call Patrick LeClaire @ 407-287-6638.