I live in a neighborhood with a lot of old trees. We have trees on our property that are at least thirty feet tall, and there are others throughout the neighborhood that are even taller than that.
These trees have been here for a while, well before the neighborhood was built in the 1990’s.
As I looked through the trees the other day, thinking about raking once all the leaves started falling, it occurred to me that people simply don’t plant trees that large. It just doesn’t happen. If I want a tree in my backyard, I’m going to get one that’s anywhere from a few feet tall to maybe ten or fifteen feet at the most.
A fully mature tree with roots that stretch far into the ground that’s been around for many a decade? One of those isn’t making it’s way into my yard, and probably yours, anytime soon.
Your Tree Of Wealth
I started thinking about it and realized that trees are a lot like wealth. You look around and you see people that have built wealth. Whether it’s a famous person like Warren Buffet who defines wealth to someone who lives comfortably in retirement because of modest wealth, chances are they did not simply get their wealth planted as it stands today.
Instead, they started off small. They planted their tree of wealth.
They took care of it.
They watered it, so to speak.
They allowed the roots to grow and spread.
They watched it slowly grow taller. Maybe so slow that they didn’t even realize it was growing, but when they took a step back and looked at it compared to a few years ago, the difference was noticeable.
One day, they looked at their tree of wealth and realized that it had grown to a significant level and it was all because they gave it care, time, and patience.
In thinking about how trees grow, the same needs to be said for wealth. It doesn’t grow quickly overnight. Patience is key. For those who are looking to build to a certain level of wealth, expectations must be set. Time must be allocated. Care must be given. Progress has to be measured.
It all fits together.
Readers, if you envision your wealth, does it help if you think of it as growing like a tree? Both up in the sky and through the roots that strengthen it below. How do you apply the principles of growing a tall tree to growing your wealth?Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.
How is your retirement looking? Could you add more to the pot?
I’m a firm believer that you can never have too much stashed. For this reason, I also feel it’s important to plan for multiple income sources in retirement. Of course, everyone has their own ideas of what is a good amount of income. But one thing’s for sure: once you are retired, you can’t go back in time and undo mistakes.
Right now, the goal should be securing your golden years. How can you achieve this?
1. Build your liquid savings. Although a regular savings account doesn’t earn much interest, this type of account should be included in retirement planning. Having liquid funds on hand can be a godsend if you deal with emergencies, such as car and home repairs or medical expenses. Most retirees live on a fixed income and without a liquid savings account, meeting certain expenses can be challenging.
Deposit a percentage of your current earnings into your savings account. Do not touch this money–watch it grow. If you are not happy with the rate on your savings account, explore other options, such as a high-yield savings account or a money market account.
2. Employer retirement options. There is no rule that says you have to invest in your employer’s 401(k). But why wouldn’t you? Contributions are automatically taken out of your check and invested, and in most cases, you won’t even miss the money. It is literally one of the easiest ways to grow your retirement. Plus, you can choose how much to contribute.
3. Individual retirement account. Do not get too comfortable with your 401(k). Yes, this is an excellent way to get started, but add other retirement accounts to the pot. For example, opening a Roth IRA account can become a source of income during retirement. Since IRA contributions are made with after-tax dollars, withdrawals in retirement are tax-free. It does not take much to get started, and unlike a 401(k), you can choose your investments.
4. Mortgage-free. It is not the kiss of death to retire with a mortgage loan. But if you can pay off your house before retiring, that’s one monster expense you do not have to worry about. Plus, when you own your house free and clear, there is the option of borrowing against your equity if you run into financial hardship (cash out refinance, home equity loan or reverse mortgage). Not that you want to, but it’s always an option.
Take a look at your personal finances. Can you presently afford to increase your home loan payments? This move can knock years off your mortgage term. Additionally, if you are looking to buy a new home, can you afford a 15-year or a 20-year mortgage?
Nobody wants to worry about money after retiring. If you plan early, learn your options and make wise financial decisions, you can sail through your retirement years with very few financial worries.
Information in this post was provided by Amanda G, a frequent contributor to Money Beagle.Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.
Currently, I contribute all of my retirement contributions via my employer’s 401(k) plan. I don’t quite max it out yet, though I’m working toward that goal. However, I’m giving serious consideration to ceasing contributions, and instead contributing to my Roth IRA instead. Here are a few considerations:
Right now, my employer doesn’t match anything, so there’s no discernable benefit to contributing even a penny to that plan as far as that goes. They did a nice match for awhile, but cut it at the height of the recession, and all signs point to a continuation of the ‘no match’ policy.
One of the big reasons I’m thinking of switching is because of the eventual tax considerations involved between the two. According to today’s rules, I’ll eventually have to pay income tax on my 401(k) withdrawls, but not so on the Roth IRA contributions. Assuming that this policy holds true for the monies in the accounts, I think it would be good to have a balance between the two.
Because the 401(k) is pre-tax, whereas the Roth IRA would be post-tax, the up front effect would be that I’d be contributing less. If I suspended contributions to the 401(k), I would take the resulting difference in my paycheck and contribute that toward the Roth IRA, so the net effect would be zero in terms of my ‘net pay’, though a $400 contribution today could be a $300 contribution tomorrow.
The market has performed so well that the difference has probably worked in my favor. By contributing more, I’ve been able to take advantage of the gains with the extra money involved. If I were to switch to a Roth IRA, I’d be betting that the massive gains would be tapering off, at least in the short term. I’m starting to think that the market is ready for a breather, so this would be a good time in my mind.
One thing that I like about the 401(k) is that my money is divided up between funds that I choose which give me a good allocation. I’d have to discover how to make these allocations on a regular basis.
There are currently no up front transaction fees with the 401(k), but depending on what my investment preferences are, I could pay $10 per transaction, as my Roth is currently through Ameritrade. They do have no-fee funds, but I’d have to do some research to see if they are comparable. If I were to purchase anything with a transaction fee, I’d have to determine the threshold on when to make transactions. I wouldn’t want to make a $300 investment every pay period, for example, and pay a $10 fee each time. That would be a 3.3% investment fee right off the top. Instead, I’d have to accumulate the cash to a point where it made sense.
I do a regular check to make sure that I’m not involved with funds that charge over a 1% annual maintenance fee as I believe anything above that is too high. I’d have to carefully look at whether the fees and results are comparable with the options available.
Should I choose, I could invest in individual stocks with my IRA contributions. Some argue that you should never do that with retirement investments. I’d have to do research and give some serious weight of the pros and cons. Right now, it’s an ‘out of sight, out of mind’ thought process.
Right now, my retirement allocation never hits my paycheck. With the option of having it deposited and more ‘available’, would the temptation exist to defer some of the retirement contributions? Regularly or even occasionally would be detrimental to the long term goal of a fully funded retirement. Knowing myself and my financial personality, I believe the risk to be extremely low, but it’s still a factor worth considering.
There It Is
So, there’s the long and short of what I’ve taken into consideration. I’m curious what you think, readers, and if any of you are in this boat, what you’ve done and how you go there. Are there any factors I haven’t thought of or mentioned?
Thanks!Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.