If I could I would, but you have to be at least 62 to start earning Social Security. Plus you don’t get enough money trust me. I have seen my Father’s check and hundreds of people’s checks due to me previously working at a bank. That’s what I want to talk about, making sure you are not making 12K when you’re 65. Here is my Generation X (I could be Y, I’m 27 idk) speech aka The Dad Talk. Put money in your 401K, because I said so! Down below you will see some info on what, when, and where for a 401K.
• What. A 401K is a type of account you put money in tax free. OK dumb it down more you ask. Say you earn 500.00 before any taxes are taken out, but after taxes you make 400.00. The 500.00 is what the 401K takes from. So in the end a 401k account takes from the 500.00 so you pay less in taxes.
• Where, So Where Does My Money Go? Your money goes into a type of investment like a mutual fund (mutual fund is made up of different stocks of a company). So let’s say you put 100.00 into your 401K every check. Your 401K buys 100.00 worth of that mutual fund tax free.
• When. As you are putting money in tax free it adds up faster. So not only are you avoiding taxes to put your money in, but you are helping it grow faster. Over time you are putting in more money and it is growing and growing, not losing money due to taxes you have to pay. This is where the Financial Adviser shows you the big graph of your money growing over time. Since I am not a financial adviser, there is not a chart, but bankrate.com is a great website for investments.
Here is another way to think about it. Think food and where you keep it. So your refrigerator is your 401k account (it holds all of food), the food is all the mutual funds aka stocks in the fridge (milk is Company A, eggs are Company B). The food because it is in the refrigerator I protects it from bugs and heat (the bugs and heat are taxes). So if you keep milk in a drawer it will get worse and worse just like taxes it takes away because it is not protected, you are not using the 401K account=Refrigerator.
OK son or daughter thank you for listening and make sure to send me a Father’s Day Card this year and not spend it on beer or clothes.