One of the most difficult situations an investor can face is to have done the right thing and suffer a wrong result. Depending on others for your future financial well-being may sometimes have unexpected negative consequences.
If you participate in your employer's pension plan but the company fails or has not properly funded the plan, you may be left in a precarious financial position. The same may occur in municipalities that have underfunded pension plans. Recently some small cities have defaulted on employee pension obligations. What about the people who relied on the pension plan to fund their retirement? Was their trust in their employer justified?
In the years following the implementation of Roth IRAs--a retirement account that allows withdrawals which avoid taxation--government's perceived need for more money prompted discussion of possibly taxing Roth IRA withdrawals. Some members of Congress were considering breaking the promise made to Roth IRA participants. Would the government do something like that? Consider what happened to those receiving Social Security benefits. Social Security benefits were, at one time, not subject to tax. Now Social Security payments are taxable, depending on the amount of your other income.
Lesson one: do not put all your eggs in one basket--especially if someone else is holding the basket.
Lesson two: your trust in other-directed programs--employer or government--may be unwarranted. Expect that everything promised in the present will not necessarily occur in the future. Social Security for future generations may not have the same form as the current program. What happens when changes are made? Who knows? People who are contributing to Social Security and Medicare may not have the same benefits as current recipients.
Lesson three: employer and government-sponsored programs are always subject to change. Your financial future is too important to hand over to someone else. It is better to have an account that you control. The assurance of knowing that your own personal nest egg will be there is a greater benefit than promised tax savings or promised employer matching or reliance on a government program.
Lesson four: establish your own investment regimen that you will maintain throughout your working years. Choose an option that you understand, that allows consistent contributions in line with your budget and that gives you the ability to receive income when you no longer want to work.
Lesson five: develop the habit of depending on yourself. Remain dedicated to your own personally controlled investment account. Your long-term financial well-being is in your hands.
Howard Feigenbaum is Registered Principal and Owner of Sharemaster, a Broker-Dealer firm that specializes in monthly dividend income funds.
"Do you know the only thing that gives me pleasure? It's to see my dividends coming in." - John D. Rockefeller
This article is a general discussion of the subject and is not intended as a solicitation or specific investment advice.
Copyright 2011 Sharemaster
http://www.monthlydividendcheck.com/
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