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A little bit goes a long way.

Recently I was involved in a discussion about retirement plans, and how many people were active contributors to their respective retirement plans, albeit a 401-k or 403-b.  For those who are not familiar with a 403-b plan, it is essentially the same thing as a 401-k but it applies to school workers, as well as people involved in non-profit organizations.

Anyhow, I looked online to find out what is the participation rate amongst employed people who participate in an employer sponsored retirement plan.  I was trying to sift through all the non-sensical websites and find information that was provided by either the IRS, Department of Labor, or some branch of government.  

Unfortunately, I wasn't able to find what I was looking for, so I resorted to sites like Forbes and Financial Samurai to answer this daunting question.  According to Forbes and Financial Samurai, 32% and 38% of eligible employees participate in a 401-k, respectively.  So lets just find a happy median here and say that 35% of all people who have access to a 401-k participate in it.  

In my opinion that is incredibly low, and furthermore, we do not know how much these people are contributing to their retirement plans.  I say all this because it highlights a couple of things to me that are a bit frightening.  The first is that not enough people are saving enough money for their twilight years.  Therefore, they either plan to work until they die or are willing to accept a very inexpensive lifestyle for their final years on Earth.  

I for one think that it is critical to have money on hand, if not for the quality of life, than for the option to live longer.  It is scary to think that people I know and care for may have to make a decision when they get older as to whether they want to be able to keep their lights on or opt for a medical procedure due to financial constraints.  That is a decision that I hope, I or nobody I know, ever has to make.  

The second thought that concerns me is that this illustrates a short sighted mindset that exists in our culture.  People seem to be unwilling to exercise delayed gratification.  Perhaps some people think they may not live long enough to see that money come into their hands or they believe money is meant to be spent and enjoyed now.  I get that, I totally dig that, and for a long time I lived like that.  However, as I got older and pondered on the issue more, I understood that the funds I set aside now will be there for me when I'm older, and if I should go before I can use it, then my wife and son can inherent whatever funds I have set aside.  Its like they say, the ugly duckling will always turn into a beautiful swan, and nothing is more beautiful than money in the bank.    

So I say all this because recently I have been surveying teachers and people who work for the department of education who have the option to participate in an employer sponsored 403-b known as TDA.  TDA is unique in that it is the only program within the city that offers a guaranteed fixed return of 7% to UFT members and 8.25% to all other participants.  This is truly a great deal, and it is akin to buying a $1.00 for $0.90.  Yet, I have found a staggering amount of people who do not contribute, or contribute a small portion of their salary to this fund.  

It is in those moment that I would like to offer some unsolicited advice that has been given to me through multiple phases of my career.  Max out your TDA (or retirement contributions), and then figure out how to make everything work after that.  If you can't do that, then contribute as much as you can, and for every incremental raise, put that money into your TDA.  For example:  Lets say I am currently contributing 10% of my salary to my TDA, and I will receive a 3% bump in September, then instead of absorbing that 3%, increase my contribution rate to 13%.  

I have this quote in my office that I truly enjoy from Muhammed Ali.  He says (and I'm paraphrasing) I hated every minute of training but I said 'don't quit'.  Suffer now and live the rest of your life as a champion.


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