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If "Forced Savings" Is the Only Way to Start Planning for Retirement Then Start Here

Many employers offer a defined contribution, taxed-deferred retirement plan.  The IRS code specifies various kinds of accounts like the 401(k), the 403(b), or for federal workers, the TSP.   These long-term investment accounts are very similar in how they work.  The employer defines how much they are willing to deposit into their employees’ retirement account and what the employee can deposit.  Notice this is “defining the contribution,” not the benefit to be received many years later.
These 401(k) plans are good as a “forced savings” program, especially if the employer is matching the employee’s deposit, but of course they do have their drawbacks. One of them is that so few are taking advantage of these matching programs.  Nationally the percent of participation is less than 33 percent.  Most employees have a hard time just paying their bills and putting food on the table.  If an employee does not take advantage of this tax-deferred retirement plan, it is the same as if it is not offered.  For example, if you can read, but never pick up a book, it is the same as if you are illiterate.  If you feel like you need a way to force yourself to invest in your future and the 401(k) offered at work would be a good way to at least put some money away, then now is the time to create a spending plan so you can create a bit of surplus to put into one of these tax-deferred programs. So the first step is to control spending to create surplus so you can start a retirement account for the long-term.
The second step is to get in control in other ways financially so that eventually you can look beyond a 401(k) and such forced savings programs to more lucrative and tax-saving methods of investing in the future. That includes learning how to save into a liquid account, such as an emergency savings fund BEFORE maxing out a 401(k), as I mentioned in my last post:  Learn How to Save First, Invest Later.
In terms of retirement, however if all you have right now is a 401(k) that offers matching funds from your employer, then I say go for it. Learn how to at least put money into this for a while. This will teach you the value of saving and  help you earn confidence in your ability to build a retirement fund. Having a little money invested can go a long way emotionally towards producing greater wealth down the road. But this should only be viewed as a beginning step. Once you get on top of finances, it’s time to graduate to bigger and better retirement and investment options, including real estate, investor trading, small business ventures, life insurance, and so forth. I have posted many articles on where to put money that makes more sense than a 401(k), but for now if that’s all you have do the best you can with this until the opportunity to do better comes to you.
The only way you will be able to leave the herd and get away from just going with what the crowd is doing (deferred savings programs) is to build a spending plan and track how you spend according to that plan.  You will be amazed to see where you really spend money and what your real priorities are. A spending plan will help you stop the transfer of wealth away from yourself continually and help you get out of debt. Once your debt is under control you can create a tremendous cash surplus that will allow you to save money in a whole bunch of ways that are a ton more meaningful than a 401(k). To learn more go to www.moneymastery.com.

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