Financial Procrastination
November 1, 2006
401k Overachiever
I contribute the maximum amount to my 401k each year. Earlier this year I updated my withholding percentage to 25% of each paycheck. The plan was to contribute the maximum as quickly as possible. Once I had hit the cap on annual 401k contributions, I’d use the money for other investments outside of the retirement account.
I was discussing my plan with a friend at work, who I think lives a money smart life, and he mentioned that my strategy had a flaw that would cost me hundreds of dollars. Our company matches up to 3% of each 401k contribution. If my contribution percentage was too high and I maxed out the 15,000 cap for 2006 by the fall, then I’d miss out on the 3% match for the remainder of the year’s contributions.
Procrastination Sucks!
I thanked him for his insight and put it on my list of things to do. It made sense to lower my 401k contribution percentage but I had plenty of time and would get around to it. Wouldn’t you know, time passed faster than I hoped and I’ve hit the max. I’ve missed out on the matching for the rest of 2006, money down the drain. My loss. If you take it to heart, it could be your gain.
The Cost of Procrastination
A Google search on Financial Procrastination led me to an article from the newsletter of Richmond Financial Associates that discusses the potential costs of procrastinating financially.
One of the things that rang true is that taxes, inflation, and procrastination are three main barriers to accumulating wealth. While taxes and inflation are almost a given, procrastination is of our own doing. We have enough trouble meeting our financial goals as it is why self inflict financial injury?
Procrastinate No More
Obviously financial procrastination does not lend itself to living a money smart life. I’m going to come up with a list of all the financial matters for which I’ve managed to delay action and get started on them this weekend. Has financial procrastination bitten you in the past? How do you avoid putting off your financial maintenance and decisions?
Yea, that sucks. Makes sense too. I guess next time, you want to ramp up that contribution super high until you get to the point where your minimum contribution necessary to get your full company match is met (that’s a mouth full…). Then pray you don’t get a raise that year?!?! =)
[…] Roth 401k I’ve been socking away a lot of money into my 401k over the last few years. Since I have such a long time frame until retirement and have no idea what tax rates will be like 40 years from now, I’d like to change over to a Roth 401k. The Pension Protection Act made the Roth 401(k) a permanent investment tool but many retirement plans don’t offer it, mine included. […]