Today, I sat at my desk trying to find an excuse, any excuse not to go meet with my financial planner about my 401k rollover. I say that as though I have been meeting with her for a long time. Quite the contrary, this was only my second meeting.

I had my grumpy pants on.  I had been late getting to work and the emails were starting to pile up in my inbox. I tried to convince myself that I couldn’t be troubled to walk down one flight of stairs to the Investments and Insurance office. I was oblivious when it came to my retirement plan and I was afraid to deal with it. I was full of regret for squandering money in my youth, failing to contribute anything to my 401k for 12 years, and dragging my feet on an old rollover for the last two years. For me, my retirement was out of site, out of mind.

One hour and a stack of signed papers later, I had a plan for retirement. This is how I got on the path.

Rollover Your Old 401k

The first piece of business was for me to rollover my old 401k. My planner and I decided to go with a moderate allocation for my existing funds: 60% stocks and 40% bonds. Once the allocation was decided, all we had to do was initiate the rollover process, which we were able to do with Vanguard by phone, and sign the paperwork to open my new account. We calculated that by the time I reach retirement at 65, the money that I rolled over today will have grown from just over $50,000 to a little over $400,000. The sooner that you rollover that “old” money, the better.

Quick Tips

• Most companies offer a free rollover, but then charge 5% of the total amount of the lump sum contribution. Be sure to read the fine print before initiating a rollover.
• The average rate of inflation is just over 3%, so your funds have to make at least 3% in order for you to break even.
• Most people make yearly withdrawals from their 401k once they reach retirement. I always assumed that you got to retirement and then withdrew a lump sum. Since the withdrawals are taxable, it’s easier to think of this money as replacing your yearly salary.

Open a Roth IRA

The beauty of the Roth IRA? You’re saving after-tax dollars that you can access at any time before or during retirement. The contributions are post-tax, but the earnings are NEVER taxed. With my investment company, I could set up automatic withdrawals from my checking account. I also would have the option to purchase and trade stocks that I was interested in.

Quick Tips

• You should think of your 401k retirement funds as money for your “living” expenses, while you should think of your IRA money as your “spending” money
• You can think of your IRA money as your “back-up” plan
• You can contribute $5,000 per year to your IRA

Set Up a 401k Automatic Allocation

In 12 years, the company I worked for gave me over $50,000 in 401k contributions. I never contributed one dime. Now, lucky for me, when I started to hear rumblings about the stock market having trouble in 2007, I pulled all of my money out of the market and placed it into bonds. Although I didn’t make any money, I didn’t lose any money in the stock market crash of 2009. However, I wasted precious dollars by not investing while I was single and making a great salary. This is the quintessential example of “pay yourself first.” You can afford to invest 1% of your salary starting out, even if your company does not match your contribution. Not contributing money when your company has a matching program is just giving free money away.

Quick Tips

• In some companies, you can’t change/increase your contribution whenever you want, you have to wait until “open enrollment.”