Do As the President Says, Not As He Does

In his recent State of the Union address,

President Obama unveiled a plan to allow

more workers to save money. This MyRA

savings plan will be a U.S. Treasury Bond-

style product, allowing for individuals to

contribute up to $15,000 per year, gain

modest returns and enjoy a guarantee that

they won’t lose principal.

The MyRA plan opts for a small, safe investment return —bonds currently offer under

3 percent annual returns. With inflation running around 1.7 percent, that’s barely any

gain at all. There are better options than MyRA available to ensure a safe future

through responsible saving.

First, if you have an employer-run 401(k) program, take advantage of it, especially if

your employer offers matching. Corporate matching is basically free money. If I told

you I could offer you a 100 percent return on your investment, you’d think I was an

investment genius. With corporate matching you take, as an example, a $3,000

contribution and your employer instantly provides you with a 100 percent return by

giving you an account balance of $6,000. Take every pop you can get through

employer plans. Only a small percentage of American workers max out their 401(k)

contributions.

Next, stock away money in a Roth IRA. This retirement plan uses after-tax dollars,

but all the growth you make in the future will be tax-free. It is crucial to understand

the importance of taxes on your money. Think about your first job—when you got

that first paycheck, it wasn’t what you thought it would be, because of the taxes. A

Roth IRA allows you to make withdrawals in retirement without paying taxes on the

increases in your investments. You get the full benefit of your savings and diligence.

Finally, seek qualified financial advice on investment products. There are full arrays

of products that provide safe, reliable gains that well outpace the MyRA’s

conservative projected returns. Investment instruments can be intimidating, but with a

trusted investment professional, you can find something that fits your goal, style and

retirement needs.

Over 50 percent of Americans have less than $10,000 in retirement savings, which is a

scary thought. Social Security will only be able to provide a fraction of the money

most people need in retirement. As our life expectancy extends, many Americans will

spend a staggering 20 to 25 years in retirement, accompanied by the higher costs of

medical care brought on by aging.

By showing discipline and forethought in the short-term, you can enjoy the retirement

you want later in life.

-Aaron Freeman

Article originally posted at Kris Miller Money Maestro blog.