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Retirement Accounts Always Beat Credit Card Reward Programs
A report by Value Penguin recently made us realize that we haven’t talked about this, yet and we should. More Americans are members of Credit Card Reward Programs than there are Americans with retirement programs.
This Is The Most Ridiculous Situation
Value Penguin discovered that 61% of Americans are happy to claim some minor benefits in exchange for the most expensive form of credit on the market.
However, they found only 58% of Americans have latched on to how to make a small fortune in extra money with a retirement plan!
Extra Money?
Yes, extra money. The government recognizes that retirement is desirable for most people. It also doesn’t want to subsidize your retirement when you get old, in case it has no money. So, it makes it very easy for you to get extra money in the here and now for your investments.
The majority of employees belong to plans in which their employers will dollar match a certain amount of contributions. That is – for every dollar you pump into your retirement plan, your employer will throw in an extra buck.
That is 100% interest before you even start earning from the investment. There is no other investment class that comes close to offering that kind of reliable rate of return. Everyone should be putting, at least, as much money into their retirement plan as their employer will match.
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Tax Deductions Too
Today, the government isn’t broke, and it is also willing to chip into your retirement plan. There are tax breaks for putting money into the pot. That tax break is paid out on the first $5,500 you put in.
So if you are in the 22% tax bracket. $5,500 in gives you a tax discount of $1,210. If your employer is matching that $5,500 – you’re getting $12,210 in invest cash total for $5,500… to get the same on a credit card reward plan with a 2% cash back – you’d need to spend over $250,000!
So, make sure your retirement plan is your priority!
