Investing in the new year

I got an email from my dad this morning reminding me that with the new tax bill that was just passed, the government will be taking 2% less of your salary this year for Social Security (FICA). YAY! Since I doubt it will be around when we retire, I would much rather invest it myself.

May I suggest that (especially if you didn't know this was coming) you invest this 2% in your retirement and jump start or pad your savings!

First, if you have a work retirement plan (401K, TSP, 403B, whatever is available) where they MATCH your contribution, you BETTER be putting money into that account (but only up to the match, unless you have lots of extra $$). You are THROWING away FREE money if you are not! Seriously go sign up for it NOW (don't wait) if they match any amount of your contribution! You can't pass up free money and you won't be able to make that return on your money anywhere else!

If you already contribute to the plan up to the match, or your work does not match it, then open up a ROTH IRA at any discount brokerage (we personally use Fidelity, but there are MANY good ones out there!). We are still at historically low tax rates, so take advatage of them NOW and get tax free money in your retirement. If you have kids, you are in a lower tax bracket then you will be in retirement! We know the tax rate will have to go up, so take advantage of the low rates and pay it now, and live a tax free retirement :)

Take that extra 2% and have it AUTOMATICALLY withdrawn from your account into a Roth IRA (or into your work's retirement account). Then you will never realize the extra money you have and spend it. You also don't have to make the conscious decision to save it either.

If you have maxed out both your work retirement match and your ROTH IRA's (you can have 2 if you are married, one for each), then I want the kind of money you are making! Just kidding :) Then, if you have kids, open or contribute more to their 529 accounts for college. Here in Oregon, you get a nice little tax deduction if you contribute for your children into the state's plan. So you get tax free money for college and a tax deduction for contributing.

So please do not consider this money extra money to spend - look at it as extra money for your future and get saving (or adding to) for your retirement!