6 Things to Be Thankful About This ThanksgivingTrevor Gerszt
It’s that time of the year again, time to get together with family, eat turkey, watch football, and think of all the things to be thankful for. As Americans, we often don’t realize how fortunate we are to live in such a prosperous country. We often complain about “First World problems” that people in less developed problems would kill to have, such as having our names misspelled on our cups of coffee at Starbucks. But at the end of the day, when we sit down and reflect on how fortunate we are to live in a country that offers us a tremendous amount of freedom, it can really be overwhelming to think about just how lucky we are and how many opportunities we have. Here are just a few things for investors to be thankful for this Thanksgiving.
Three Recent Developments to Be Thankful For
1. The Stock Market Boom
Yes, there’s a high likelihood that stock markets will enter another severe bear market in the near future. But millions of investors have benefited from the stock market’s huge gains in the meantime, helping to build up their retirement portfolios and bringing their dreams of comfortable retirement closer to reality.
The prospect of a declining stock market means that many investors are starting to shift towards assets such as gold to protect their assets and lock in their gains. But there’s no denying that the stock market boom has done a great deal to build up household wealth in the United States.
2. Tax Cuts
The tax cuts implemented by Congress have resulted in numerous American households being able to bring more money home in their paychecks. While some households may end up paying more, especially those who own multiple homes, most households should have seen a pretty nice boost in income over the course of the year.
Hopefully most people invested that windfall wisely, especially as tax rates are scheduled to revert to their previous levels in 2026. That leaves just under a decade to invest the extra money and put it to work for you, helping to build up your retirement nest egg.
3. Increasing 401(k) and IRA Contribution Limits in 2019
Maximum annual contributions to 401(k) accounts are increasing from $18,500 to $19,000, while maximum contributions to IRA accounts are increasing from $5,500 to $6,000. That’s an extra $1,000 that investors will be able to contribute to retirement accounts, an increase of over 4% over this year’s limits.
The income levels at which contributions to deductible IRAs and Roth IRAs are cut off are also increasing, which should increase the number of people who are able to take advantage of IRA investments.
Three Existing Benefits to Be Thankful For
1. Compounding Interest
Compounding interest may sound boring, but there’s a reason it’s known as the eighth wonder of the world. Interest compounding allows what seems like relatively small annual increases to turn into pretty significant long-term savings. $50,000 invested today that gains 7% annually turns into nearly $750,000 after 40 years. And if you keep adding to those savings every year, the total growth of your investments only gets larger. Add $10,000 per year of savings to that initial investment and you’re looking at nearly $2.75 million after 40 years. The earlier you start saving and putting interest to work for you, the better off you’ll be in the long term.
2. Employer Matches
This is a benefit that not all employees have, but even those that do have it often fail to take advantage of it. An employer match on 401(k) contributions is essentially getting free money. Even if your investments lose money and even if you have to pay taxes on that money when you take a distribution, it’s still money that you got for free. Take advantage of the full amount of that benefit and start putting that free money to work for you.
3. Wide Variety of Investment Choices
While the wide array of investment options can be overwhelming for many people, it’s precisely because we have so many choices that we can end up being so well off. And so many of those investment options are available through 401(k) plans, IRAs, and other tax-advantaged accounts, allowing investors to accrue savings tax-free until they retire. With the development of self-directed retirement accounts, investors can even invest in gold and silver through IRAs just as they would invest in any other financial asset, even rolling over existing retirement assets into a gold IRA to take advantage of gold’s protective status while still enjoying the tax advantages of a traditional IRA. Especially when you realize how many people around the world are still scraping by just trying to make ends meet, it really is a blessing that we have the opportunity and ability to save and invest our hard-earned money in just about any way we choose.