5 Money Moves to Make Outside of Your Pension Plan

I had an opportunity to speak at The Association of Government Accountants (AGA). The topic, as you may have guessed, covered Money Moves Outside of Your Pension Plan. I tried to cram 10-years worth of mistakes and lessons learned into a 45-minute discussion. 

The night before the presentation I had grandiose plans of driving to Austin, Texas one day early to plan, prep, rest and relax.

What actually happened was I forgot my mic at home, I accidentally locked myself out of my friend’s house before I could change clothes, and the weather decided to dip below 40-degrees as I sat trapped outside trying to rely on the heat of the Holy Spirit to keep me warm because I didn’t pack a jacket.

Later that day as I stood in front of the room dressed in casual attire I bought from Target on the way to the presentation I was almost late for despite driving up a day early to prepare, I realized a way more relevant moral to my story: expectations rarely align with reality.

What is a Pension Fund?

This is a reasonable question. Why? “In 1980, 46% of all private-sector workers were covered by a pension plan.” By 1990, it was down to 43%. By the late 2000s, less than 1 in 5 U.S. workers had access to a pension. They, whoever you want to place blame on “they” to be, gutted our collective retirement options and replaced them with 401k, 403b, and 457s and wished us “good luck.” But, more on that later…

A pension plan is a retirement plan that requires an employer to make contributions to a pool of funds set aside for a worker’s future benefit. The pool of funds is invested on the employee’s behalf, and the earnings on the investments generate income to the worker upon retirement. – Investopedia.com

A pension fund, like the dinosaurs, is going extinct. Many young people will never even have the option to access to one. One of the few benefits of aging ungracefully as a Senior Millennial–apart from watching the exciting race to see which will disappear first, my eyesight or my hairline–is that I have had the opportunity to vest in several pension funds across several employers.

Do not believe the rumors. Pension funds are neither “free money” or “guaranteed money.” My pensions have been funded from my own paycheck and a (usually) generous employer match.

Another way to view this is pension funds are what helped people (like your parents and grandparents) retire before the government and private sector raided them and replaced them with 401k/457 plans, which they also are eager to raid. You should know that these self-directed plans are often designed without your financial success in mind. Even the inventor of the 401k plan admits they were never meant to be a sole source for retirement savings. The 401k is mostly a large social experiment that millions of Americans are about to beta test for the first time in a century as millions of Boomers “retire” every day, followed by GenX and Millennials. But, the savings numbers alleged to support these forthcoming tsunami of retirements does not look good.

In addition to my Drake-like trust issues, I never planned to rely solely on any pension plan. Why would I trust some old, wealthy grey-haired guys on a Capitol Hill to have my best money-interest in mind over the next 40-years when many of them will be long gone and not have to deal with the consequences they mandated for me in a tax code footnote?

Have you seen how Washington (regardless of which decade or administration) manages America’s Money? Whew, child the ghetto!

I’m going to trust the man in the mirror over ‘the man behind the curtain.’  Here are just some of the money moves I make outside of my pension. And, I plan to add more in the decades to come.

Step 1: Remember the Key to Overnight Success

The key to overnight success is the first 10 years.

While most people are interested in crossing the finish line, the most important part of the relay race of life is making sure the “baton” gets around the track. If you drop the baton, it doesn’t matter how fast you run. The relay is over.

The baton in this metaphor is financial security and literacy. You can view each decade of your life as an opportunity to race past the competition. The competition might only be a race against time. However, I guarantee you the time will pass on its own. What can you do today that will make you better tomorrow? Repeat that 365x a year and you’ll win the only race that matters: self-improvement.

Use your 20s to learn, your 30s apply, and your 40s to pay it forward to others.

Don’t be afraid to fail. In fact, fail fast and quick. Learn from your failures and move on to your victories. Failure is the gas we use to fuel the vehicle of personal improvement.

Step 2: Have A Plan B, Then Add a Plan C – Z

Many people have advised that I should just go to work and go home and repeat that exercise for 40-years. Why rock the boat?

Because that’s Plan A.

Like boxing, Plan B through Z is to “protect yourself at all times.”

I’ve received a “good morning” text from employed friends at 8 am that were unemployed before Happy Hour that evening. While I’ve been fortunate enough to never lose a job myself, I have been “fired” by proxy a hundred times over as I live vicariously as an eyewitness.

Who here hasn’t logged on to see a headline about a company closing “completely without warning” or “massive layoffs” because quarterly profits weren’t hit? Maybe you still have LSPTIS having lived through 1990, 2008, 2011 or any other recession or major event (Note: “major event” may be localized, as in your company or department closing).

To be fair, money can’t buy happiness. But, neither can poverty. If I have to choose between trusting an employer and myself. I’m going to choose myself 1,000 times out of 10.

Step 3: Protect Yourself at All Times

If you work in the public sector (or anywhere), you might not even know what to do with your money outside of collecting your bi-weekly paycheck. This is a discussion that very few employers have with their employees. For those that do (kudos), there is still a huge retirement investment gap across all generations.

Who is going to pay for this, I wonder. What can I do about it? Like they tell you on the airplane, before trying to assist others please secure your own oxygen mask first.

“At least the core of every investment portfolio ought to be indexed. I recognize, however, that telling most investors that there is no hope of beating the averages is like telling a six-year-old that there is no Santa Clause.” – A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing by Burton G. Malkiel

The First $100,000 is the Hardest

Based on the above assumptions, here are your final returns by age:

  • If you started investing $500/mo at age 20: $1,975,346
  • 30: $962,024
  • 40: $446,903
  • 50: $185,041

Source: Investor.gov

And if you are able to reach $100,000 by the following ages, you never have to add another dollar to your investments and they will still grow to:

  • $100,000 saved by age 30 grows to the following by age 67: $1,222,361
  • by age 40: $621,386
  • by age 50: $315,881
  • by age 60: $160,578

Related: Calculate Your Net Worth

Step 4: F.O.C.U.S!

Focus On One Course Until Successful.

We live in a multi-tasking society, yet many of us unsuccessfully multi-task. When it comes to your savings, investments, or entrepreneur pursuits, I recommend you F.O.C.U.S.

The only exception to the rule is if a task compliments another task. Most of the time I see people work on tasks that conflict with one another so instead of putting 100% into completing 100% of their tasks, they end up starting 10-tasks that only ever get 10% done.

For example, this post is an example of a complementary task. 1) I was booked for a talk. 2) I F.O.C.U.S.’d on completing a deck for the talk. 3) I F.O.C.U.S.’d on doing marketing for that talk. 4) I F.O.C.U.S.’d on writing a summary post for that talk, which you are reading here today.

At no point did I do any other tasks until the preceding task was completed. Equally important is that each task benefited from the completion of the former. If you more often find yourself more Lost in the Sauce than Securing the Bag, try F.O.C.U.S.-ing.

F.O.C.U.S. on getting one high-priority task done. First get it done, then make it pretty. No one cares if you have a great idea, presentation, or invention if it never gets any further than your imagination. A simple formula to remember: Actions > Words.

Step 5: Think Less, Do More

Ten years from now, will you be 10 years further or just 10 years older?

Sometimes any decision is better than no decision at all. Therefore, inaction is worse than conservative action. You can make an informed, risk-based or low-risk decision, but you have to decide. Remember, the most important part of overnight success is a 10-year head start.

Lastly, we are all busy, and life comes at you fast. Automate every event you can reasonably predict in your life. You should only have to ‘think’ about unexpected events; automate the rest. The time will pass on its own. Today I challenge you to complete that one task you’ve been procrastinating on.

Somebody has to be great today. Why not you?

The Smooth Sounds of P & B

Before I was in charge of our Department’s Quarterly Training, I was confused why it was preordained training must be boring. I believe any topic, with the right speaker, can be engaging. When I took over, I made it my personal mission to deliver or choose trainers who promised not to bore myself or the audience to sleep.

Years later, I’m foraging into speaking and training around the country as a side hustle. Unlike a DJ that insists his wack playlist be heard by an empty dance floor, I try to stay focused on the interest of the audience. It doesn’t matter how much I talk if I am not heard.

I also know my fellow government auditors need 40-hours of annual continuing professional education. But, as far as I am concerned, you can book me for your next audit conference, after work seminar, local community book club, stay-at-home mom’s wine party, Sunday Funday French Toast and Mimosas, Happy Hour, or your best friend’s bar mitzvah. Marcus will not avoid the bookings, beloved.

If you want to stay awake during your next conference, everything you or your Training Liaison needs to know about booking The MG is available at TMG (Rich is available for Career and Podcasting expertise). At Paychecks & Balances, we help working professionals make money, save money, get out of debt, and build wealth.


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One Comment

  1. Compounding is so important, and if you have the means it’s a great gift to give to your children. We fund the Roth IRA account for our oldest who has some income but not enough to support herself and invest for retirement (yet). This way, she doesn’t miss those early years of compounding.

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