So you might be thinking something along the lines of, “what are you taking about? You’re just writing this article to scare people.” Or, if you’re like one of my relatives were this weekend, you genuinely think that the government is taking more of your money if you save it in some of your retirement accounts.
This past weekend, it went down like this;
Stock:
So, did you take advantage of your 401K and IRAs this year?
Relative:
What do you mean?
Stock:
I mean, did you save some of your money away into your 401K account so that you can start early and save for your retirement?
Relative: Oh, yeah I did 3% of my salary because the company will match 3%.
Stock: Why didn’t you do more than that? You should try to do at least 10% to 15%.
Relative: Well, I don’t want to give more money to the government. I may never get it back!
Stock: What do you mean give money to the government? These retirement accounts are YOUR accounts. They don’t belong to anyone but you.
Relative: But I heard that when I get older the government may not be giving out anymore money to people when I retire.
Stock: No, that’s not true. I think you may be referring to Social Security, which comes out of everyone’s paycheck. That has nothing to do with your retirement accounts. The 401Ks, IRAs, Roth IRAs, those are all YOUR accounts! Nobody can take them away from you.
Relative: Oh, but I thought if you did more than the company match you wouldn’t benefit from it.
Stock: Of course you benefit. You can take advantage of IRA contributions that can lower your income, and you can put money into Roth IRAs where you won’t have to pay taxes on them when you take them out. You also want to start investing in your nest egg as soon as possible so you can be comfortable in retirement.
Needless to say I was just mind boggled by their thinking process. They actually thought they were losing that money to the government? I have to phrase that as a question because I just can’t understand why they would think that. Plus, why would they think I would recommend something to them that would make them lose money to the government? So, if one of my relatives has this train of thought I bet there are others like this too. People who really have no idea where that money is going when you put money into an IRA or other retirement account.
Where does the money go that you put into an IRA, Roth IRA, or 401K?
So then you’re wondering where does that money go. Well, it goes into your account that you opened for it. Within this account you can invest in numerous things including stocks, bonds, and mutual funds among other things. You’re investing into the backbone of your country. You’re investing into Apple, Visa, Google, Target, Walmart, Amazon, Johnson and Johnson, Coca Cola, and many other powerful American brand companies.
Ofcourse there are many ways to invest your money once you get it into your retirement account ( IRA, Roth IRA, 401K, etc) and you’ll find that some ways are more conservative than other ways. It’s up to you to decide how you want to invest it, but without a doubt you should be investing it somewhere, and you should be taking advantage of your retirement accounts.