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Better Choice than Lottery Ticket

Is That Lottery Ticket Fleecing Your Retirement Savings?

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It’s the year 2035. “Choice Chips,” a blooom proprietary form of artificial, individual consciousness to help you make better personal financial decisions – particularly around 401k management – has yet to be invented….

Sadly, We Still Have Fossil Fuels and Paper Lottery Tickets

Joe stopped by the same gas station nearly every day over the last 30 years. It was 7:00 a.m. He was late for work and the attendant was just setting out the coffee for the morning rush. Joe filled his coffee and proceeded to the counter to pay for it.

“That’ll be $9, sweetie.”

Joe pawed through his wallet and yanked out a $20 bill. “Here you go.”

She looked at him, “You want to add the usual Powerball ticket.”

Joe, “You know I do. Today is my lucky day. Here are my numbers, 5, 2, 23, 45, 33 and 12.”

Behind him the door chimes rang and in stepped Linda.

Joe, “Hi Linda, how are you doing?”

“Good Joe! It’s freezing out. Playing the lottery again?”

Linda and Joe had worked for the same company for 30 years. Joe had seniority since he was hired 10 days earlier. They’d both gone to the same high school, but then headed to separate colleges. Four years later they found themselves working at the same company.

Joe, “Sure am. I’ve got to run. I’ve got a meeting in 30 minutes. Maybe I’ll see you later.”

Whose Lottery Numbers Are Better – Joe’s or Linda’s?

Later that night, as Joe sat in front of the TV watching the evening news the Powerball numbers were announced. “And tonight’s winning numbers are 5, 18, 23, 25, 4 and 50.” Somberly Joe thought to himself, “Two out of 6. ‘Well, one of these days I’ll hit the lottery.’”

At that very same moment, in a modest house across town Linda was opening the mail. There were the usual bills and junk mail. But the first thing she opened was her 401k statement. As she pulled it out, she did what she always did, she hunted for the account balance. There it was – $727,348.*

She patted herself on the back and thought, “I feel like I hit the lottery.”

And there you have it.

401k Management Is a Matter of Choice

Some might think this story is about get-rich-quick versus saving. But the moral of the story is really about recognizing life is a series of choices. Choices we all control.

Forget lottery tickets. Even if Joe had funneled those coffee expenditures into his 401k over the last 30 years, he’d likely have a lot more money saved up for retirement.

41% of millennial are spending more on coffee than they are saving for retirement. And while this stat calls Millennials to the mat (you can read our Millennial counterpoint, too: Coffee Is Not The Enemy of Your Retirement), the simple fact is that many of us walking around on U.S. soil are guilty of doing the same thing — not being intentional with our finances.

To put a finer point on it, 59% of people of who can contribute to a 401k, don’t.

None of us will get where we want to go unless we make some simple changes:

  1. Choosing to participate in your 401k (or other employer sponsored plan)
  2. Contributing at least up to the match (which many employers provide)
  3. Making sure your investments are diversified and aligned with your needs (funny, we have an online 401k service to help with that piece)

But we can’t help if you don’t choose to do the aforementioned steps 1.) and 2.) first.

Where will you be in 2035? It’s up to you. And we stand ready to provide 401k help.

We used a Bloomberg.com 401k Savings Calculator with the following assumptions to get Linda’s results. Based on 6% annual contribution on annual salary of $50,000 over 30 years with a 4% annual salary increase, 50% employer contribution match and 7% rate of return.

Investing involves risk. Your investments are subject to loss of principal and are not guaranteed. Please consult an investment advisor before you invest.

Published on May 18, 2017