Basic Savings Strategies
Brian Ramsey in today’s version of the weekly blog series is on the the most basic fundamental saving strategies that we walk clients through. This is mainly geared towards our younger clients or their clients that are in the wealth accumulation phase of life. So we’re gonna be talking about pre-tax and post-tax savings buckets. You haven’t seen that that video you might want to go back and check it out. We explain what pre-tax versus post post-tax savings accounts look like. But on the pre-tax side the most common one we see clients you use is a 4 or 1 k for 1 k for 3 b simple eye array. And really we refer to these as company sponsored retirement plans. Now most folks what we find is their contribution limits are really whatever the matches. So for example if we have a client that’s putting in 6 percent of their pay to their company sponsored retirement plan it’s more often than not that clients put it in 6 percent because they’re getting matched by the company up to 6 percent. And so that’s a basic rule that we find that clients sort of follow. Now one thing that we encourage clients to do every year and most people get raises throughout the year over year. So what we encourage clients to do is to increase their contribution limits by 1 percent a year or 1 percent every other year. Now in their paycheck we show them throughout the planning process that by them contributing 1 percent more year it doesn’t have a huge impact on their paycheck.
And so more most people can just sustain that additional 1 percent giving and most of that is covered by the raise that they got. Most people get you know two or three percent and a raise and they defer 1 percent more into their company sponsored retirement plan. So they still get a bit of a raise. But the impact is not that great especially when you’re talking only 1 percent. And so the other saving strategy we have is contributing to a post-tax account. Now there’s a number of different type of accounts that are in that post-tax savings. We’re I going to get into those today. Those are in future episodes or in episodes we’ve already had. But on the post-tax side again this is a scenario where we walk clients through cash flow planning and we identify money at the end of the month that the client really could be saving if they wanted to. And so what we encourage clients to do is to take some person is some dollar amount every month and transfer it automatically or systematically to an investment account. Now the reason we do that is because you know studies have shown over the years that if money stays in a checking account people spend it. That’s OK. But if you systematically move money from a checking account over to an investment account the more likely that client is to accumulate wealth. And so that’s what we encourage clients to do. Now at the end of the year we’ve accumulated some money and now we’re looking to distribute that money to whatever account type that we find most appropriate. So those are the two most fundamental basic ways of saving stress saving strategies that we encourage clients to consider.
Number one increasing their contribution to their company sponsored retirement plan by 1 percent either either every year or every other year depend on how often you get raises and then to a lot some dollar amount every month to be transferred from your checking account into an investment account. So if you’ve got any other questions about that’s a strategy or any other strategy you feel free to give us a call. Make sure you tune back into our podcast series where we go into a lot more detail around the different types of pre-tax savings accounts and post-tax savings accounts. But today we just wanted to give you an idea of the two most fundamental principles of saving and what they look like and what we encourage to walk lines through. But thanks for watching and we’ll catch you next time.