Free Money!

Free Money

By Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy

Did the title of this article grab your attention? If so, that’s great because I’m going to tell you how you can get free money. Seriously. No joke.

To start off, ask yourself the following three questions:

1. Am I participating in my employer’s retirement plan?

2. Does your employer match your contributions?

3. Am I taking full advantage of any employer matching funds?

If you answered “yes” to all three questions, FANTASTIC, you may not need to read any further. However, if not, please read on to discover how you can get free money.

Participate In Your Employer’s Retirement Plan

Many companies and organizations offer employer-sponsored retirement plans, which can be a great source of income in your retirement. If you haven’t already signed up to contribute to your employer’s retirement plan, such as a 401(k), do it now. Have your contributions automatically deducted from your pay so you don’t have to think about it.

Not only will you be saving for retirement, but these contributions have an added benefit of providing tax advantages either now or in the future. For example, with a traditional 401(k), you defer income taxes on contributions and earnings until retirement. With a Roth 401(k), your contributions are made after taxes and the tax benefits come later allowing your earnings to be withdrawn tax-free in retirement.

If you’re thinking about not enrolling in the retirement plan because you don’t think you’ll be staying at that company very long, I strongly encourage you to think again. I’ve heard many people, especially younger people, say they don’t plan to stay at a particular job for any length of time, so they don’t bother enrolling. That’s a big mistake. Oftentimes, people wind up staying in a job longer than they anticipate and they have missed out on years of saving for their future. Plus, even if you decide to switch jobs you can roll over that money into another retirement account.

Lastly, think of it this way, if that money isn’t in your paycheck in the first place, you most likely won’t miss it.

Free Money!

I promised to tell you how to get free money. Well, here you go. Many employers offer to match any contribution you make to your 401(k) up to a certain amount, such as a percentage of your annual salary. If you can, contribute at least that amount so you can take full advantage of your employer’s matching funds. Let me give you an example. If your employer contributes 50 cents for every dollar you save, that’s an immediate 50 percent return on your money. 50 percent! No other investment will likely give you that kind of guaranteed return. Don’t miss out on this “free money!” I encourage you to reach out to your employer’s human resources specialist for more information or to set up a contribution. It's really that simple.

Building Wealth For Your Future

The best way to build wealth and plan for your financial future is to invest over a long period of time. Because of the power of compounding, your original investment earns a return, and then, over time, your future returns also earn a return. So, the sooner you start, the more time your money has to grow.

Contributing to your employer’s retirement plan and taking full advantage of your employer’s matching funds (remember, free money!) will not only enable you to say “yes” to the three questions at the beginning of this article, but it will also help you plan for a strong financial future.

Note: Director’s Take articles are written in a short, non-legalese format intended to provide you with tips and information on timely investment topics that are important to you. You can subscribe to receive Director’s Take articles or find our latest article on the Director’s Take spotlight page.

This article is provided in the author’s official capacity as the Commission’s Director of the Office of Investor Education and Advocacy but does not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff.