Easy read finance book teaching planning, budgeting, 401k investing, and money management techniques.
A step by step guide to help employees take advantage of money given away by their employers. Jo Ann walks the reader from job inception to retirement, helping him or her understand the importance of investing early. Guidelines are given to help the reader prepare a watch list with a goal of achieving an early retirement amounting to over $744,000. Jo Ann empowers the reader to become knowledgeable about products offered by the company's 401k)plan. The book serves as a tool to help the reader become a proactive manager of his or her portfolio.
Excerpt
I worked in Corporate America for 10 years. When first hired, I
endured a grueling two-week on the job training course. The
instructor gave explicit instructions on how to perform the job. I was
drilled for hours, day in and day out. One morning, I was
introduced to someone from the payroll department who gave a 15-
minute presentation about the company’s 401(k) plan. I listened
intensely and gathered several details only to learn that I could not
join. As I repeated the phrase through my head, “You cannot join
now,” I wondered why someone would even mention something I
can’t participate in.
I walked out of training, job ready, and never thought about the 15-
minute 401(k) presentation again.
The casual presentation of such an important subject along with
being told I had to wait one year to participate, sent a subliminal
message insinuating the 401(k) plan was not important.
I have found such messages can cause irreparable damage,
especially to young employees.
In my experience, the average young adult leaves training and
never thinks about a retirement plan. Instead, they focus on their
own apartment, or family, and eventually find themselves in debt
and financially strapped. Once financial hardship strikes, they
conclude it easier to say, how they cannot afford to save year after
year.
Many young people enter a profession with the mistaken belief that
the job will provide a pension for them, the same as it was provided
for their forefathers.
Young people tend to ignore the fact that this is their
responsibility.
Generally, companies do not emphasize strongly enough that once
the 401(k) plan has been implemented, retirement financial
planning is solely the employee’s responsibility.
One may conclude the subtle introduction during training is not
good enough.
Since investing is not a one size fit all proposition, people establish
their savings plans and objectives using different criteria. Note the
following:
Long Term Goals Short Term Goals
401(k) New Car
IRA Vacation
Child’s college education Home down payment
A long-term goal encompasses money needed 20 or more years
from now, whereas a short-term goal refers to money needed in 5
years or less.
In some households, a female may return to the workforce solely
for the purpose of fulfilling a short-term goal when it comes to
saving money. She may work 5-15 years depending on her
objective. Most people will establish different savings accounts to
meet their short-term and long-term goals.
As you set up a long term or short term savings plan, it is important
to find investments that earn at least an 8% rate of return.
In other words, if you have $10,000 saved on January 1st, your
goal should be to have $10,800 saved by December 31st after
interest and compounding. Once you consistently earn an 8% rate
of return annually, observe the amount of money earned in 5 years
depending on the amounts invested weekly.
$38.46 saved x 5 years = $12,672
$76.92 saved x 5 years = $25,344
$153.84 saved x 5 years = $50,687
When an individual has a clearly defined objective to save $38.46
weekly and continue earning an 8% rate of return, he or she can
accomplish any short term goal or long term goal.
If the individual is currently living in an apartment, he or she may
decide to purchase a home. If the individual owns a home already,
a decision may be made to update the kitchen or some other home
improvement project. This decision represents a short term goal.
A long term goal can be money needed for your child’s education.
By saving $38.46 weekly and earning an 8% rate of return for 15
years, one could earn the following:
$38.46 saved x 15 years = $58,649
$76.92 saved x 15 years = $117,297
$153.84 saved x 15 years = $234,594
Do you need $58,649 in 15 years for your child’s education?
A long term goal can also be money needed for your retirement.
Most men and single household families enter the job market with
the expectation of working 30-40 years. To meet a retirement long-
term saving objective, look at the amount of money earned in 35
years if the following amounts are saved weekly.
$38.46 saved x 35 years = $372,204
$72.92 saved x 35 years = $744,409
$153.84 saved x 35 years = $1,488,817
In other words, if you start working at age 20 and save $76.92
weekly for 35 years, until age 55, you will have a total savings of
$744,409 to afford a well deserved retirement lifestyle. This is
attainable.
What I am mentioning should not be considered a dream but a
goal. A goal other people accomplish everyday. A goal that is
easily attainable when starting at a young age.
Now you say it. “I want to retire before I am 60 years old with a
savings of $744,409 or more.” Now say it with passion. Doesn't
that feel good?
Starting in 2007, the Federal Pension Act established an
investment limit of $20,500 per year.
If you are under 50 years old you can only invest $15,500.
However, employees 50 years and older can invest an additional
$5,000 per year bringing the total to $20,500.
It is important to understand when a company establishes
parameters that prohibit someone from investing either
$15,500 or $20,500 annually; the company is doing the
individual an injustice. Are you that individual?
If at this time you are completely clueless as to what your company
offers, FIND OUT NOW.
Remember the goal to save $58,649 in 15 years or $744,409 in 35
years?
Prolonging a long term saving goal limits interest earned which
denies you your money.
Back to my point, as time passes and an employee stays with the
same company for years, the company may disrupt an employee’s
retirement savings plan by changing plan administrators.
Changing the plan administrators will make the investment products
change.
Investment products are the mutual funds the employees are
allowed to invest in, according to the company’s plan. The plan
administrator is the investment company hired by the employer to
manage the account. Each plan administrator recommends
different mutual funds to the employer. This may adversely affect
the employee because certain mutual funds will be eliminated
during the transition.
After surviving four different plan administrators within a 10-year
time frame, I decided to take matters into my own hands. I have
developed a plan to make sure I make money at all times. I have
shared the procedures with several coworkers and friends who
found the techniques to be very profitable.
Krystal worked in a company for 25 years and solely invested in an
index fund priced at $130 per share. After reviewing her scenario, I
suggested purchasing 3,000 shares of a different mutual fund.
Based on my advice, she later made over $20,000 due to the
disbursements of dividends and capital gains. She continued
acquiring additional shares of this mutual fund making sure the
price was below $31.
Nicole, on the other hand, was a 25-year-old female, who was new
to the company and had just become eligible to invest. After our
discussion, I found that she did not know what the 401(k) plan was.
After many discussions regarding the various types of mutual funds
the company offered, she chose to put her money in a target fund
that invested solely in index funds. She currently rejoices, watching
her 20% rate of return.
I acknowledge you may not understand some of the terminology in
the above examples, but I need you to focus on the big picture.
Both of these women achieved an amount of wealth they felt was
unimaginable. Continue reading and you can learn how to do the
same.
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