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How a double oven may help your retirement plan

Jan 03, 2018 09:45AM

by John Masus

Just the other day my wife was cooking a roast and I was in the kitchen supposedly to help, I say supposedly because usually I’m just in the way as I hunt for a snack or I’m looking for my car keys. In any event, this time I was there to help.  She asked me to open the oven as she carried the evening’s roast toward me.  You are probably already wondering why I wasn’t carrying that heavy roast to the oven.  That can only be answered by the women reading this article.  When she asked me to open the oven door, I asked… which one? She responded with …the upper one.

See there is always more to it that just face value.  There were two ovens just in case another one is needed.  Now you are probably thinking, wow he wasted a whole paragraph on his lack of kitchen experience.  But wait, it wasn’t wasted.  Because now you’re more apt to remember what I’m about to say regarding retirement funding. (You will love this transition).

Most articles we read about retirement funding talk about saving at least 10% of gross income in some form of payroll deduction plan. Perhaps a 401k, 403b etc.  I think that’s a good beginning point and I’ll call that part one. (The upper oven). So let’s now consider the lower oven or part two.  That part two sits right there with part one in the order of importance because it’s the backup insurance policy you will need and it comes in handy with the lump sum expenses in retirement.

I know, I know, now you’re thinking man, that guy is brilliant the way he transitioned from double ovens to retirement funding.  Putting that aside for now, let’s go to the basics.

The convenience of the 401k/403b payroll deduction goes without saying.  If there is a company match, so much the better.  However, this second need should also be addressed.

The easiest way would be to set up an investment plan and put it on auto pilot just like the payroll deduction plan.  It can be set up between a bank checking/savings account and an investment account with periodic or monthly transfers (for example, say $100 a month).

There are a couple of different accounts that can be used for part two. The first one I think of is called a non-qualified account and is invested with after tax money.  It is not tax deductible and the amount you can put in is unlimited.

However, the fact that it is not a tax deductible account means it has some real advantages tax wise down the road.  Less taxes to pay when you need to use it for those house repairs or when your 3rd cousin by marriage on spouse’s side wants that $25,000 to open his Laundromat.

Another thought would be a Roth IRA. The Roth does have some rules attached.  But if you follow the rules it’s a good program.  My suggestion would be about 5% of income in these accounts in combination with each other in case the rules of the Roth do not allow you to fully fund the 5% of income.

So now we have a total of 10% payroll deduction pre-tax and 5% after tax. Both on auto Pilot.

This seems like a lot of money doesn’t it?  Perhaps the goal can be to start slowly and gradually increase it over time.  As it grows the plan actually becomes part of the process.  It’s worth considering for you savers out there.

If you keep thinking about what you want to do or what you hope will happen, you don’t do it, and it won’t happen.

Desiderius Erasmus…Humanist and Scholar

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

John Masus CLU, Chfc, CFP is an LPL registered principal with clients in 24 states. Securities offered through LPL financial, Member FINRA/SIPC.  Masus Financial Group is a registered investment advisor, a separate entity from LPL Financial.  You can email John.Masus@LPL.com or visit our website at www.masusfinacial.com.

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