My main purpose for contributing into the deferred compensation plan, as mentioned, is my belief that the only retirement that my wife and I are going to have once I retire is what we contribute. Therefore, we feel it’s important to place money into the deferred compensation plan.
Initially, it was an amount I thought we could afford. We sat down and we just said, “looking at what our expenses are, well we think this amount is what we can put in that Plan.” So my wife and I decided we are going to add a little this year and we’ve continued that practice.
I think one of the big deterrents, at least in my experience with the other state employees that I work with, is the belief, whether it’s true or not, that they just don’t’ have the funds to contribute to the Plan. In reality, I’ve told them you probably have it. You’re spending it elsewhere and you need to prioritize that the retirement is more important than some of the other things that you may be spending money on. If we get to a point to where we think, “we’ve got to slow down here and stop spending so much money”, it’s not we stop putting money into the deferred comp.
Well, the most rewarding part of it is the knowing that if you contribute now at an early age and contribute for 20 years or 25 years that, in my opinion due to the traditional rates of return of our deferred compensation plan, that you’re going to have large nest egg when you retire.
My advice would be to take advantage of the Plan, number one. Contribute what you can. Reevaluate annually, if you can, what you contribute. If at all possible, force yourself to contribute a little extra every year. Take the leap and start contributing that money. You truly will not miss that money from your pay check each month.