Category : 401k

The Market Zigs…and it Zags

Most of blooom’s clients will admit that they don’t often look at the value of their 401k. But if you have been watching the stock market lately you would have seen that it has dropped a fair amount just in the past few weeks – which in turn will lead your 401k to zig and zag in value.

This is nothing new – it’s just been a while since you’ve seen this happen.

Over the past 3 years, basically since August of 2011 when the US Debt was down-graded, we haven’t seen much of a pullback (market decline). In fact, we have now gone 3+ years without even so much as a 10% pullback in the market. That is very unusual. Not nearly as unusual as our hometown team the Kansas City Royals making the playoffs for the first time in 29 years, but unusual nonetheless! Market pullbacks are not only normal….they are NECESSARY. If it was always a straight ride upward, then everyone would be a stock market investor and there would only be a fraction of the return premium afforded to investors.

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120% Rate of Return

If your employer offers a pre-tax retirement savings plan like a 401k, 403b, 457, or similar and they offer a matching contribution you may be the lucky benefactor of a 120% rate of return on your contributions.

Let me explain. Lets assume the following:

$50,000 annual salary
Your employer matches 100% of the first 3% of your contribution. So if you contribute 3% of your salary to your 401k, your employer will also contribute 3% of your salary to your 401k.

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Widen the gap between your last day of work and your last day on planet earth

Chris and I have successfully helped over 400 families enter retirement. Some of those folks continue to live a wonderful and fulfilling retirement. Unfortunately, some only had a brief time to enjoy their retirement.

You see, once in a while a client will have an unexpected illness fall upon them. Unfortunately it’s happened a number of times, and as recently as a few months ago to a great client. We’ll call him Joe. He retired at age 65. By age 67 he’d passed from lung cancer. Thirty-five years of working towards two years of retirement.

By now you might be asking what this could possibly have to do with blooom and 401k help…fair enough. Here is your answer:

I find myself asking the question, if blooom had been around for Joe 30 years ago, would he have been able to retire at age 55? If so, he would have had 12 years of retirement versus 2 years. What could Joe have done with those extra 3,650 days/87,600 hours/5,256,000 minutes of retirement? Would he have made it to more of the grandkids’ soccer games? Would he and his wife spent more quality time and moments together? How many more lives would he have touched at his church or in his community? Hauntingly and unfortunately, I think he might have accomplished more.

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We’ve been called a lot of things. Now we can add tease to the list.

Which is appropriate – as this is our teaser video for FinovateFall 2014.

If you are planning to attend, the video should whet your appetite – and even if you aren’t attending, it’ll probably make you wish you were. Since it’s sure to be a hectic two days, if you’d like to set up an appointment in advance to visit with us at the conference, please email us at: rockfinovate@blooom.com

Since our blog not only attracts industry experts but also angst-ridden-401k-folk, some of you might be asking, “What in the world is Finovate and what is blooom’s role?”

For starters, blooom competed against an untold number of applicants and was handpicked to get seven minutes on stage to demo our latest innovations to the Finovate audience of 1200 leading financial executives, venture capitalists, press, industry analysts, bloggers, and fintech entrepreneurs.

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The 10% Savings Trick

We hear it quite frequently…”I just can’t afford to put aside 10% of my paycheck towards retirement.” Or sometimes…”We are just barely getting by on the income we have right now.” If you find yourself in this position then I highly encourage you to take a look into Dave Ramsey’s tools and specifically his Core Financial Wellness Program.

But if this article reaches you before you take your first full-time job and before you have car payments, credit card debt, etc. I implore you to implement the 10% Savings Trick. It is incredibly simple in its concept but massively important in its execution. It works like this…The moment you hear what the annual salary offer is (spoken or written) from your first employer – trick your brain into hearing (or seeing) a figure that is 10% less than the actual amount. If you think you hear $60,000 – immediately convert that to $54,000 in your head and base your decision on that adjusted figure of $54,000. Should you decide to accept the offer – in your mind, you will be accepting an offer of $54,000.

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