Like many people, I have invested in the stock market for many years. Through all the ups and downs of the markets.
But after 40 years in the workforce, my largest pool of investment money isn’t in stocks in my personal portfolio.
It’s in my IRA and 401(k).
This is true for most people who make a living by working for someone else.
There are four important reasons why I have most of my money in these two accounts:
- 100% of the money saved to the account gets invested and put to work.
- The growth, dividends, interest, and returns compound without taxation until withdrawn. I haven’t retired yet, so the money that is growing has never been taxed. Woo-hoo!
- Because there’s a penalty to withdraw funds prematurely, I never spent any of the money. I left it invested. (Even though I wasn’t frugal with some of the non-retirement account money I accumulated.)
- I always maximized my contributions as I progressed in my career. So I was able to take advantage of larger and larger contribution opportunities.
What I have is a substantial amount that will be valuable if I quit working.
These accounts have worked hard for me and my financial security. They have also worked for the hundreds of people I have advised over the last 40 years.
And they could also work for you.