As a retirement plan educator, the question I’m most often asked is, “How much will I need to retire?” The answer is always that it depends.
Having said that, here’s what is important: Control what you can control. In a retirement plan, you cannot control what an employer will contribute and you cannot control the growth of your portfolio … no matter how much risk you’re willing to take.
What you can control is how much you are willing to contribute, and whether your deferral contribution should be the traditional pre-tax contribution or a Roth contribution.
It stands to reason that the younger you are, the more you should use the Roth contribution as the deferral method for your 401(k) or 403(b).
I’m in favor of the Roth contribution regardless of how much money you make or your age. This opinion has some detractors, but at retirement, I’d rather have both a Roth bucket and a pre-tax bucket. Having options at retirement makes planning a little easier.
Let’s remember that the easiest way to invest is not to see the money in the first place. People often say they can’t afford to put away any more for retirement than they already do. In all but the tidiest of budgets, is this true?
Yes, we have car payments, mortgages and college educations to fund. But when we get a raise, how many take part of that and increase our retirement savings?
Here’s a promise: If you raise your contribution by 2 percent, you’ll learn to live without the money in three to four paychecks. Do yourself a favor and do it today.