Kiplinger Financial Truth or Bunk-Round 2, Question 3
ByIf your employer offers a match on 401(k) contributions, that should be your first stop for investing.
True. Talk about an ace in the hole. That match is free money you shouldn’t pass up. For instance, if your employer offers a fifty cent match on every dollar you contribute, you just made a guaranteed 50% on your investment. You can’t beat that.
To see the entire quiz: http://content.kiplinger.com/quiz/truth_bunk_2/index.html?qid=33
Often a person tells me s/he can’t afford to participate in a 401(k), but really, folks, you cannot afford NOT to participate in a plan with an employer match. If the employer matches 6% and you don’t think you can afford it, start with 3% and then promise yourself with every pay increase you will increase your 401(k) contribution one percent. When it comes out of your paycheck before you ever get your hands on it, you’ll be amazed at how painless it is. You’ll also be amazed at how quickly the funds accumulate in your account. Soon you’ll be saying, “OMG! Why didn’t I start this years ago?”
If your employer doesn’t match funds, divert a small amount into a savings account (most employers can direct the funds to more than one account). Use the same theory: as you get pay increases, increase the amount that goes to the savings. The idea here is to transfer the funds (after you’ve established an emergency savings fund) to a Roth IRA. It takes longer to accumulate in this fashion because you’ve lost the tax deferral of the 401(k), but it’s still a great way to get started saving. http://MoneyAwarenessProgram.com
