Are you a Retirement Account Neglector?
Updated: Sep 6, 2018
Have you moved jobs and forgotten to roll your 401(k) into a lower cost IRA account? Are you waiting until some unforeseen day to start saving for retirement but just never got around to it?
If you answered yes to any of the above questions, don’t fret! You are not alone! Research shows that many Americans are woefully unprepared for retirement. A recent study estimates that one every four Americans are not saving for retirement at all. i
Don’t wait to plan for your retirement until it’s too late.
Here are some simple steps to help you with your retirement planning:
1. Math. Use it in your favor
Start investing early. The longer time horizon you have, the better chance you have of taking advantage of compounding returns.
For those unfamiliar with this concept, compounding returns means that your investment returns are magnified over time. For example, if you were to earn 8% a year, you would double your money in 9 years ($10*1.08 = $10.80 *1.08 = $11.64 * 1.08= $12.59 *1.08 = $13.57… you get the idea)
Disclaimer: No I am not promising 8% a year returns forever. Please read all of the disclaimers everywhere, every made and including on this website.
Furthermore, depending on the type of retirement account, the investments in those accounts receive beneficial tax treatment. Also, some companies will match your contribution (free money) to your retirement plan.
2. Get organized
It’s estimated in a report by Country Financial that 55% of Americans don’t know if they are participating in a 401(k) plan, and of the 45% who do, only 3 in 10 know how their money is being invested. ii
Gather all of your financial statements, including your orphaned 401(k)s from past jobs, rollover IRAs and that investment account that your aunt Sue opened for you when you were a kid and make a list of their values and what your investments are in each of these accounts.
3. Ask for help
For many of us it’s not in our nature to ask for help, but it is definitely in our best interest. A recent Stanford study shows that some simple planning and education can dramatically improve one’s retirement income, standard of living and happiness. iii
Sit down with someone with experience, expertise and integrity to have a full evaluation of your current situation. This could include a full accounting of revenue vs. expenses, assets vs. liabilities, a comprehensive picture of all of your investments and insurance, a performance evaluation and an analysis of what your risk/reward profile is for investing your portfolio(s).
At Vitreous Partners, we offer free, completely confidential consultations. Think of it as a financial and retirement check-up.
4. Consolidate & execute
Now that you are armed with a clearer understanding of what your situation is and how to proceed, go about setting this plan in motion. Stick to that budget. Put money away every month. Invest with a professional according to your risk profile and add to your investments over time. Consolidate your retirement accounts or open one if you don’t have one yet.
It’s a marathon, not a sprint. So take it one step at a time.
Make sure that you are able to aggregate your information either by consolidating your accounts in one place or by utilizing aggregating software so you can check on your progress. At Vitreous Partners we utilize a comprehensive and secure portfolio reporting system to report on our clients assets no matter where they are held.
5. Everything changes over time, including your financial situation
When circumstances change, your retirement and investment plan should change as well.
If you have a windfall, or a lower earning year or two or your goals have suddenly changed (i.e. you have children or purchase your first home), you should revisit your plan and determine how you’d like to proceed. Again, you are not alone in these situations, nor are you the first one to experience them.
Take a deep breath and go through the above process again.
As always, we would be honored to help you with any and all of your retirement preparation, if only to answer any questions that you may have.
All the best,
Rob Santos CEO, Vitreous Partners
i Country Financial Security Index Survey, http://www.countryfinancialsecurityblog.com/cfsi-may-2014
ii Country Financial Security Index Survey, http://www.countryfinancialsecurityblog.com/cfsi-may-2014
iii “What Will My Account Really Be Worth? An Experiment on Exponential Growth Bias and Retirement Saving,” with Colleen Manchester and Aaron Sojourner, March 2012.
Disclaimer: This document is confidential and intended solely for the recipient. It may not be reproduced or redistributed without the prior written consent of Vitreous Partners, LLC. This is not an offering or the solicitation of an offer to purchase an interest in any investment. Any such offer or solicitation will be made to qualified investors only by means of a confidential offering memorandum and only in those jurisdictions where permitted by law.