In front of me sits a dissembled clock encased in plastic with a the following message, “TIME IS MONEY. Blessed is he who has both.” Below the saying are three pennies; two from 1981 and one from 1979. I’m assuming it was purchased prior to my birth in 1983. For as along as I can remember it has been mine. While growing up it was in my room and now is part of my office. Given its time and travels it is in good condition.
Before I could read, I recall being mesmerized by the parts of the clock and the shine of the pennies. I had little a clue about the message that was centered between the clock and the pennies. It seems this same disconnect echos through lives of many people in our country today. Where does one start? Lack of growth in inflation adjusted wages? The number of people receiving food stamps? The explosion of college debt? The reliance on home equity to boost purchasing power? The list seems to be never ending.
Through this journey called life I’ve come to a point where I either don’t know or don’t believe in the general picture, which we call the American Dream. The American Dream constantly appears as a perpetual state of consumption that is exponentially increased with each subsequent generation. A first generation American seeks more ‘basic’ goods and then is followed by a lineage that demands greater and greater good services. Is this the Dream?
The American Dream as it stands today should be called the quest for the greater comfort. While this might sound good and reasonable, at a certain point chasing greater comforts equates to being soft. At what point does one tip the balance between comfort and weakness? For the sake of the site’s theme, we will focus on financial weakness.
To consume requires fuel. Fuel in this realm means money. An increasing share of the population has turned into quasi-grifters through the use of government handouts. These subsidies are realized through tax collections. Tax collections stem from many different sources, but a very significant amount come via income and payroll taxes (approx 47% for income and 33% for payroll). The financial weakness experienced by a large portion of the population is subsidized by another portion of the population.
In order to lessen the impact of being part of the government’s leveling plane, you need to start contributing to a retirement plan. Whether this is a 401k, 403b, IRA or 457, whatever options that are available to you should be utilized. Such savings will shield you from future taxes or at least defer that tax burden until some point in the future. I would go so far as to say that it does not matter if you take the money in your retirement account and throw it in cash until you know what you’d like to invest in. The principal importance is that you’ve avoided the wrath of the Federal and State taxman. Depending on your situation, this burden could vault beyond the range of 40% or 50%. The ‘return’ alone from avoiding taxes is humongous.
Who’s American dream do you want to subsidize? The person you see in the mirror or everyone else? Time is money. Value them both and make smart decisions, given the rules our society allows. Retirement accounts are an out that are currently afforded to reduce your tax burden and increase the money you are able to keep for yourself. The concept of retirement is a measurement in time and is born into existence through the arrival of financial independence. America had to fight for its independence. Now its time for you to fight for your financial independence.