Why Starting Early Matters: 401K, IRAs and CDs

August 23, 2018 | TS Prosperity Group

Your late 20s, 30s and even early 40s can often times seem to be far away from retirement. Usually during these years most are busy starting a family, raising a family or working hard toward a dream job or promotion. However, these years are the most critical to set you up for your dream retirement goals. 

A Dream is a Plan Your Brain Makes

When meeting with clients, the team at TS Prosperity Group has a whole set of questions we ask to help visualize what retirement might look like for each individual. Believe it or not, that’s the first step to achieving your retirement goal! Ask yourself, what do you look forward to when you no longer have to worry about work? Do you aspire to be a snowbird, or do you want to pursue a dream hobby? Even if all you plan on doing is catch up on some long-needed sleep, you must visualize what you are looking for. Once a goal is visualized, the next step is to set yourself up with the right saving plan to achieve these retirement goals. 

Small Changes Lead to Big Differences

Saving during these “early” years can be a daunting task, especially if you’re still working on paying off debt from secondary education or a mortgage. But take a look at how these really small changes can lead to a larger savings account: 

• Switch to the basic plan on all of your streaming services
  Top 8 streaming services (ad-free plans) combined* = $100/month vs. Top 8 Streaming Services (Basic Plans w/ Ads) Combined* = $61/month ($39/month savings) Invest $39/month @ 7% for 30 years = $44,200 
  *Costs are as of January 2024 from Wall Street Journal

• Cut back on that caramel macchiato from Starbucks® three times a week
  Grande Caramel Macchiato = $5/day x 3x/week = $780/year ($65/month savings) Invest $65/month @ 7% for 30 years = $73,700

• Eat out one less time per week
  Sit-down dinner for a family of four = $60 x 1x/week = $3,120/year ($260/month savings) Invest $260/month @ 7% for 30 years = $295,000 

For tips on saving and how to eliminate debt, read The Good, The Bad and The Ugly Kinds of Debt.  

Dreams Don’t Work Unless You Do

Now it’s time to put that plan into motion! A major benefit offered by many employers is an employer sponsored retirement plan, such as a 401(k), 403(b), or Thrift Savings Plan. If your employer offers one of these, get enrolled! While it can be rough seeing money subtracted from your overall paycheck, remember your end goal. If your employer matches—bonus! Always make your contribution match your employers for a maximum return and consider increasing your contribution every year or with every promotion. This will make those contributions easier to handle and most likely, unnoticeable. 

This may go without saying but get out of “bad debt” as soon as possible to maximum savings. Once most of your debt is paid off, start saving. It’s a best practice to build savings into your budget; treat it as a debt owed to yourself. Similar to how you pay off a car loan, set up a retirement savings account, such as an Individual Retirement Account (IRA) and every time you get paid, have a set amount to put away towards your retirement goal. 

Once you are enrolled in your employer’s plan and have your debt at bay, it’s time to diversify your assets. Everyone has a unique situation and careful planning will help decide where the most beneficial places to save are. Talking to a Financial Planner can help you determine whether a Pre-Tax Vehicle (contributions are tax deductible, growth is tax deferred, and distributions are taxed) or Post-Tax Vehicle (contributions are taxed upfront, growth and distributions are tax free, provided certain criteria is met) is right for you. 

Lastly, a good rule of practice with investing is to never keep all your eggs in one basket, so to speak. When your money is diversified or “split up” in different assets, in the event of a downturn in one asset, you are protected against losing all your money since it’s invested in different baskets. At TS Prosperity Group our Investment Philosophy follows this strategy: we manage downside risk first. 

If you’re wondering how to get started, we can help! To sit down and customize your financial future and begin planning, please call 844-487-3115 or fill out the form below to schedule an appointment. 

At TS Prosperity Group, we IGNITE PROSPERITY® by helping our clients do more with their money. Whether it’s saving a little extra cash each month or accomplishing a long-term strategy, our goal is to help you transform your financial life. Call and schedule an appointment today, one of our team members would love to help you do more with your money at TS Prosperity Group. TS Prosperity Group is based in Council Bluffs, Iowa, with clients across the midwest. For more information visit tsprosperitygroup.com or call 844-487-3115. #igniteprosperity