FEBRUARY/MARCH 2016 retirement account. Found money is anything above and beyond your expected wages, (e.g., a year-end bonus, a raise, an inheritance, etc.). You’ve budgeted and become accustomed to spending based on your current salary, so you won’t miss anything additional that comes in. The experts all agree on one proven strategy to ensure the bit you can put away makes it into your retirement fund: pay yourself first. “That means having the money automatically debited from your paycheck or bank account before you pay a single bill,” McDonald noted. “You won’t miss it if it isn’t there to begin with.” Many workplaces offer a retirement account, like a 401k or 403b, that will allow you to set up automatic withdrawals from your paycheck. Some even offer an employer match, which equates to free money, McDonald noted. He advises employees to allot what they can afford into their employer retirement accounts to take advantage of employer matches, then to create a globally diversified portfolio of low-fee stock index funds. DISCIPLINE BY DESIGN For healthcare professionals working per diem or pro re nata, traditional employer-sponsored retirement accounts may not apply. These professionals (and those wishing to save above and beyond their employer accounts) have two options, IRAs and Roth IRAs. You can contribute up to $5,500 per year to an IRA or a Roth IRA, Snyder reported. If you are age 50 or older, you can put in an additional $1,000 per year for a total of $6,500. IRA contributions are tax deductible, but are every dollar is taxed as regular income when withdrawn, McDonald explained. “If you do well, this can be painful in the future,” he said. “Also, most younger workers aren’t in a high tax bracket. For most, a Roth-IRA is preferable. You don’t get the immediate deduction, but every dollar grows tax-free, forever. Plus, you never have to take minimum distributions in the future like you do with a regular IRA.” Look for a Roth-IRA with a custodian with no minimum and no fees, then set up an automatic monthly debit from your checking or savings account, McDonald advised. “TD Ameritrade is one firm that offers no-fee IRAs and access to commission free exchange traded funds (ETFs). For young investors, consider an ETF like Vanguard Total World Stock ETF. It will be a bit volatile (moving up and down a lot, just remember stocks have risen about three times more than they have fallen), but you have lots of time. This fund contains almost 7,000 different stocks and has annual expenses of just 0.18% per year (the average for mutual funds is over 1% per year).” Taking charge of your own retirement means even more discipline is required, McDonald stressed. Start by coming up with a hard percentage of every paycheck to contribute to the Roth-IRA. He recommends a minimum of 10% of your pay (20% is better). Opening a linked checking and savings account will allow you to deposit your paycheck into the savings account and then transfer only 90% (or 80%) to your checking account—working on the principal of “if it’s never there, it’s harder to spend.” Then have your Roth custodian take monthly debits from the money in savings (let the savings account grow to several hundred or more before you start the Roth debits). While you’ll always have pressing financial obligations, saving for later years from the start is a gift you can give yourself for a comfortable, worry free retirement. Kerri Hatt is editor of ADVANCE. Contact khatt@advanceweb.com 24 ADVANCE FOR MEDICAL LABORATORY PROFESSIONALS PROFESSIONALISM
ADVANCE for Medical Laboratory Professionals • February/March 2016
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