海角大神

401(k) plans available at work? Sign up. Now!

401(k) plans offer tax advantages in addition to convenience. If your employer's 401(k) plan offers to match your contributions, then you're losing money out on free money.

This tip is directed at everyone who has a job where a 401(k)/403(b)/other individual retirement savings plan is available, but you鈥檝e not yet signed up for it out of laziness, forgetfulness, or some other non-retirement-based reason. This tip is聽doubly聽directed at everyone whose employer offers matching money for that retirement plan and they鈥檙e not signed up for it.

Open that account now.

Let鈥檚 be realistic here. If you鈥檙e under the age of about 50 or so, you鈥檙e playing a fairly dangerous game in assuming that Social Security in anything close to its current form will be there for you when you hit retirement age. Most likely, the money will be a pittance and not nearly enough to survive on. There鈥檚 some chance that there will be nothing at all.

Don鈥檛 rely on that pension, either. Companies go under 鈥� even governments go under. Many look for ways to get out from under the financial burden of paying out that pension they鈥檝e promised to their employees, and many get away with it.

The only retirement tool I believe in is one鈥檚 own savings for retirement, and that鈥檚 where a 401(k) (or similar plan) comes in.

For most people, a 401(k) plan is the absolute easiest way to get started saving for retirement. In many workplaces, you just fill out a form, they take a little money out of each of your paychecks, and you鈥檙e saving for retirement. Not only that, the money taken out of your checks isn鈥檛 very painful at all. If they take out $20, it likely only drops your take-home pay by $16 or so because the money is taken out before taxes are calculated.

Even more importantly,聽some employers offer free money into your 401(k) if you put money in yourself.聽Let鈥檚 say your employer offers a one-for-one match. If you sign up to put in $20 per paycheck, your paycheck only goes down $16, you put $20 into your account and your employer puts $20 into your account. That鈥檚 free money, and if you鈥檙e not signed up for it, you鈥檙e saying no to that free cash.

Some people stress out about the investment choices. Don鈥檛.聽Even if you make a really poor choice among the investment plans offered, you鈥檙e still far better off putting money in there than you are not putting anything in at all. Saving money in a terrible investment is much better than saving nothing. You鈥檙e better off just picking a plan at random than you are putting it off another paycheck.

That鈥檚 not to say you shouldn鈥檛 look at the investments and try to figure out the best one. The thing is, you can do that later. You can change investments later on without much difficulty at all if you decide you鈥檇 rather be in something else. The only difference is that if you start saving for retirement now, you鈥檒l actually have money in there to move.

Of all of the financial mistakes I made in my early life, the one I聽诲颈诲苍鈥檛聽make was putting money away for retirement. I saw the challenges my parents were having as they neared retirement and I 诲颈诲苍鈥檛 want to have that kind of difficulty. I put in quite a lot, and I鈥檝e never really stopped.

Looking back on it, I realize that I would have had bigger paychecks had I not put that money away, but I know full well that if I had bigger paychecks back then, I would have just spent the money on things I 诲颈诲苍鈥檛 need.

You won鈥檛 miss the small amount that鈥檚 gone from every paycheck, but a few decades down the road, you certainly will miss not having hundreds of thousands of dollars in retirement saved if you don鈥檛 make this move today. Just do it.

This post is part of a yearlong series called 鈥�365 Ways to Live Cheap (Revisited),鈥� in which I鈥檓 revisiting the entries from my book 鈥�,鈥� which is available聽聽and at bookstores everywhere.聽