How Do You Switch From Saving To Spending?

Sometimes a commercial catches my eye as one that really delivers on the message it’s trying to get across.

One group that I’ve seen lately is the Fidelity ‘green line’ commercials, where there is a ‘green line’ guiding someone down the path to their financial goals, and of course that green line is the input and help that Fidelity offers.  They seem to be focusing on the ‘end of the green line’ leading towards retirement.

I don’t know why but the commercials work for me.  I don’t use Fidelity for anything and have no immediate plans to use the type of services that they’re offering, but I can see how they would be appealing to those who would.

It made me think.  I wonder if they offer, not only the best way to save and get to the goal of retirement (though I won’t be able to retire by 40 *sigh* but one can dream), but how to make the transition once you get there.

Since I’ve started working, I’ve been focused on saving.  The goal is to build wealth, save money, and work so that you can accomplish big things along the way but also eventually have a retirement.

That seems like it would be a very big switch.  You have been tooling along for decades trying to save and save, and now suddenly your goal is no longer to save, but to spend.

You actually expect your net worth and savings/investment accounts to start going down in value.

That alone seems like a very scary prospect to change that mindset, but it’s all part of a personal finance plan that should be in place if you’re ready to retire.

I wonder, do these firms offer any guidance on the psychological, as well as the financial, aspects that go along with retirement?  If you’re retired, how did you make this switch?  If you’ve got retirement on the horizon, how do you prepare for this?

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Raise or 401(k) Match?

A co-worker and I were talking the other day and we started discussing the pros and cons of getting a salary increase versus a 401(k) match.

Our company cut both in 2009 and there’s no shot that we’re getting both raises and reinstatement of the 401(k) match.  Frankly, I’m not convinced that we’ll get either.  We’ll probably find out in the next month or so if there is any benefit increase for 2011, though as I said, I’m not holding my breath.

I’m curious as to what the thoughts are as to which is better.  My co-worker was squarely in the corner of the 401(k) match, as the tax benefits and encouragement to save for retirement outweighed the benefit of having a larger paycheck.

I agree with him on these points, but he went so far as to say that a 1-2% 401(k) match would be more favorable than even a 3% raise.

This is where I’m not convinced.  I figure, even with the tax implications, I could get a 3% raise, dedicate 1% of that to increased contributions in the 401(k) and still end up with probably 1.5% more take home pay.

His argument (and again, it was hard to disagree with him) was that, while he and I would probably dedicate some or all of a raise to a 401(k) match, the majority of people probably wouldn’t, and would just take home the money (and spend it).

What do you think?

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