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Thursday, May 24, 2012

The Fifty Shades Trilogy and Becoming the Master of Your 401k Plan

Hello All Help Wanted Seekers!


By now everyone has heard about The Fifty Shades Trilogy (Shades of Grey, Darker and Freed)...and...if you haven't...hit Google now....
The story has made quite a media splash and was featured last week on 20/20. It’s a tale about a young girl who is "subservient" to an entrepreneur who can offer her all things that money can buy including opportunities in first rate companies that he buys on a whim.
Some readers are outraged at the story which signifies that a smart, attractive woman could become a second class citizen to a man. Shades, introduces us to Ana, a recent college grad that is idealistic about life and inexperienced when it comes to love. She meets Christian Grey, a self-made millionaire and CEO of his own company who has deeply seeded ambitions to “control” all in his life including Ana both sexually and monetarily. It becomes easy for Ana to be caught up with expensive gifts, high tech toys and unimaginable “trysts”. But, is the story really portraying this? Or....is the story showing us a young woman's struggle to become acquainted with her inner self?...The trilogy can in the eyes of the reader show us that a woman has the ability to make decisions in all aspects of her life...
If there are "Shades of Grey"  ...one thing must remain black and white...do NOT confuse your personal life with your business life...it is a recipe for disaster. The key to a successful 401k portfolio is diversity and level of risk. When spouses work for the same company, their choice of retirement investments are limited which can cause a lack of growth and if the company goes under their combined efforts will follow suit.
Even in the best of scenarios....why would you put all of your eggs into one 401k basket??
Here are some pitfalls to avoid:
1.       Tomorrow is another day: It may have worked for Scarlett O’Hara but, it won’t work here. One of the biggest mistakes is not contributing at all to your company’s 401k plan. Contributing lowers your annual taxable income, and many employers match an employees’ contribution up to a certain amount. This is like getting free money that’s not taxable.
2.       Time Waits for No One: Start early. A Bankrate.com publication stated the following calculation:  “Let's say you invest $200 a month beginning at age 25, and you earn 7 percent annually on that money. By the time you turn 65, you will have about $525,000 saved up. If you wait until you're 35 to begin saving, assuming the same monthly investment and rate of return, you'll have amassed less than half that amount -- about $244,000”
3.       Forbidden Fruit:  It can be very tempting in bad times to use your 401k as a piggy bank but, withdrawing funds can create steep penalties and the money you withdraw (which was not taxed to begin with) will be taxed at your income tax rate.
4.        At Your Own Risk: Younger investors can afford more risk tolerance, while those closer to retirement should be apportioned in more stable options (which leads up to #5)
5.       Beware and Be Aware: Review your choices at least once and year and read your quarterly statement. We are all guilty of “how many hours are in a day”. But, your 401k could be your retirement ticket. Life events like marriage, divorce, bad news about your company, market swings can make things change.. and …your company plan may change.
6.       Hidden Costs: Most people don’t know what their 401k plan is costing them. There are fees taken off the top and given to Wall Street to “manage your account”. Beginning in May 2012, 401k contributors will receive a statement with the breakdown of where the money being allocated for fees is going. It’s a good idea to be in the know!
7.       New Kid on the Block: When you start a new job and you’re the new kid on the block…it goes without saying that you are in the “I gotta prove myself mode”…don’t forget…new job…new 401k plan. While you will still have the other plan…wouldn’t it be easier to roll your plans into one? 
So….KISS = Keep It Simple, Silly and with some work and a (little market luck) - hopefully your retirement life can be Fifty Shades of Green…
 Your Employment Yenta (Just call me "T")

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