FIRE.019 Free Money: The Alternate Angle, Families

Let’s get right to it. Your company may want to give you more money with nothing expected in return! It’s that simple.

Matching – I’m sure you know that the employer match is a great source of free money. If you have a defined contribution plan at work your employer may incentivize you to save money by offering to match up to a certain percentage. You MUST do this and get the free money. I read that SO MANY people just assume their auto-enrollment will take care of their retirement. I can’t figure out how saving the 3% auto enrollment amount, even over 40 years, will be enough to make you FI. Well, unless the match is a magical 10% of your gross salary, regardless of your contribution. Saving 3% means you are spending an after-tax base of 97%. That is a big lifestyle to live up to in retirement.

One neat suggestion retirement tax strategy that I’ve been reading about lately—especially for employees in the lower fed tax brackets—is to contribute to a Roth401k/403b and let the employer match go into the qualified 401k/403b. This will allow your retirement foundation to have future assets in both tax-free and taxable accounts giving you the ability to control your withdrawal strategy and attempt to control the tax hit in the future. Maybe like having two different engines supporting your plane’s glide path.

MAGIC: If you’re a parent and you have some means, any means, you can help drive your children towards the rewards of saving (i.e. saving early). The idea is called the “Parent Match,” which works just like an employer match incentive. You can tell your child “whatever money you save, we will match at the end of the month.” The goal of course, will be for them to keep some of the money saved for the future. The idea of saving and being rewarded will take hold. They may even like seeing the balance rise. I touched on this idea in FIRE.06.

If you cannot match dollar for dollar, you could set up a goal For example, if you have $25, I will put in $10 more. Or you may be able to add a 50% match. In all reality, I feel if you have to match their saving at 100% (what’s $100 to you in order to steer your child to a stronger financial future—especially considering all the boomerang children out there who may not have learned good financial/saving skills) You could easily save yourself money (your retirement money?) in the long run.

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