The first step to success is recognizing potential.
When I was planning to make the transition into financial planning as a career I volunteered to speak and answer questions at informational sessions for National Guard troops and their families that were being deployed overseas. While these men and women, both the soldiers and their families, were sacrificing for their country, they were also being offered unique benefits. (Not that they were enough compensation but at least it was something).
One benefit was that the soldier’s income while overseas was tax free. Even better than that is the fact that they could also contribute to a Roth IRA – that was huge. Why? Because normally Roth IRA contributions are after tax, meaning you pay tax before contributing. When you withdraw the money in retirement it is not taxed so you get the benefit of tax free growth. What these soldiers were being offered was an opportunity to invest money and have it grow without ever, let me repeat, ever, paying taxes.
I was standing at the back of the room when my colleague was making this presentation. A soldier and his wife were standing next to me and the wife pointed out this unusual and generous benefit. “I don’t care about that,” the soldier said. He was in the right place at the right time but unless he acted on that information, the opportunity would be lost. I wonder how many of the people we owe so much took advantage of that benefit.
Taking action is the second component of success.
The other aspect of success is that once you recognize an opportunity, you have to be willing to sacrifice to get the benefit. The soldiers aren’t paid well for their service and diverting $4,000 (the maximum at the time) into a Roth IRA could be a hardship. If they looked far enough into the future, however, they would have seen the benefit of this action but I suspect that many did not.
Are you open to opportunities? Are you constantly on the lookout? Would you be willing to sacrifice, now, for a benefit that is years in the future? Then why aren’t you?
Posted in General, Money, Taking Action and tagged investment, IRA, opportunity, planning, Roth IRA, taxes by AJ with no comments yet.