Protecting Your Retirement Savings

December 12, 2008 by  

Ok, as many of you know, the market isn’t exactly performing the way it “used to”…
and, on top of that, I have heard many people ask, or tell me, that they are thinking of stopping their contributions to their 401k, or their IRAs, or any retirement account due to the markets…

First, you do that, and your retirement will only suffer…the stock market will go up in the future…the only way the market will not go up is if the country goes out of business. Don’t see that happening anytime soon.

Second, lets say you have $10,000 currently in your 401k, you are 30 years old. Over the next 30 years until you retire (actually it should be 37, but who is counting), that money alone, invested in a diverse stock mutual fund portfolio, will rise on average 7% – 9% on average. Giving you approximately $110,000. That is if you don’t put anything additional in.

Now, lets say you have that same $10,000 account, but instead of stopping your contributions, you continue to put $5,000 a year into the account. That additional $150,000 that you put in there, along with the original $10,000, would now give you approximately, $735,000.

If you would stop your retirement contributions, and put that $5,000 into a savings account (lets say an ING account), earning on average 2% a year, you would have $315,000 in your account.

So, lets review, continuing with your contributions, like normal, $735,000.
Stopping and putting that money into a “Safe” account, $315,000.

You don’t need me at this point to see where I am heading, do you?

Bottom line, stay the course, keep putting money into your retirement account every chance you get. It will be the difference of a GOOD retirement, and an OK retirement.

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