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Retirement Savings

Retirement Savings

There are three important axioms to building one’s retirement savings:

  1. One can never start too early.

  2. One can never set aside too much money for their retirement savings. What’s the worst that could possibly happen?

    1. You could spend it.

    2. You could leave it to your children or to other heirs whom you designate in your Will. What a nice surprise for them!

    3. You could leave it to one or several worthwhile charitable nonprofit organizations.

    4. Some combination of the above.

  3. The power of compounding is the fundamental, underlying principle behind building a significant retirement savings account. The earlier that one starts setting aside funds for their retirement, the more effective the power of compounding will be.

Employer matching contributions = Found money. ALWAYS contribute as least enough into your retirement savings account in order to receive the maximum amount of employer matching contributions.


Self-Directed Retirement Accounts

Test to be added soon …


Borrowing From Retirement Accounts

In general, it is never a good idea to borrow funds from your retirement accounts, regardless of the purpose or your intent. Consider this option only as a last resort, after you have exhausted all other possible financing alternatives first. Here’s why:

  1. Whatever amounts you borrow are no longer available in your account, compounding and earning more money for you. The power of compounding is the fundamental, underlying principal behind saving money in retirement accounts in the first place, as discussed above.

  2. If you are terminated from your job or decide to quit, the entire outstanding loan balance will be reclassified as an early withdrawal and reported on Form 1099-R, which is taxable as ordinary income. Furthermore, if you are younger than age 59 ½, the entire amount will be subject to the IRS 10% early withdrawal penalty.

The only time to consider borrowing from your retirement accounts is when you are faced with an emergency, and there is no other financing alternative available. Before resorting to withdrawing retirement funds, look into home equity lines of credit (HELOCs) or refinancing your mortgage or other debt.



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