Back when I lived in a hippie commune with approximately nine humans and 37 dogs, I biked to the library on a regular basis. It was an easy way to keep myself in reading material without spending all of my meager paycheck on books.
As I was leaving one day, I asked one roommate if she wanted me to pick up anything at the library for her. Her response: “Is it free?”
Is it free? Is it free?
Let’s pretend for a minute that it’s not completely weird and unbelievable that an adult human being could grow up in the United States without ever having learned the first thing (literally, the very first thing) about the public library. Let’s also set aside the fact that this particular person was an English major! I’ll just state, definitively and for the record:
The library is fucking free, you fool. So why the hell wouldn’t you use it? Especially if you’re on a tight budget and trying to save money?
If I had to rank all the things I love to do in my precious free time, where would opening a retirement account fall? Let me see, hmm… Above a root canal, but below politely accepting a religious tract from a door-knocking missionary. What can I say? Some of them have pretty nice artwork!
Have you been procrastinating on opening your retirement account? Feeling lazy? Avoidant? Afraid of the paperwork? Feel like you’d rather use that money on stuff right now? Obviously I feel you.
But buck up, son! I’m about to tell you why you can’t afford not to open a retirement account.
To recap: Americans have access to two main kinds of retirement accounts.
First, a 401(k)—or 403(b), if you work for a nonprofit—is a retirement fund facilitated by your employer. You set it up so they can take money directly out of your paycheck and squirrel it safely away for you to use when you’re terrorizing orderlies in the nursing home. That way you can focus on maintaining your record as Wheelchair Drag Race Champion of Shady Hills Retirement Community and not get distracted by petty financial concerns.
Second, there’s IRAs (individual retirement accounts). IRAs are very similar to 401(k)s, but they’re attached to you directly instead of your employer. There are other differences, but meh, they’re pretty minor. You can get acquainted with the finer points later.
Retirement accounts are powerful tools for growing wealth and stability for your future self. The trick is you have to opt into your retirement account. If you’re self-employed, or you work for a company that doesn’t offer 401(k)s, you need to go out and open your own IRA. And if you work for a company that offers 401(k)s, you need to sign up and voluntarily tell someone to NOT give you part of your paycheck every month.
As broke as you are right now, ignoring a perfectly good retirement fund is a terrible idea. Because if you do that, you’ll lose money in three different ways.