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What Can Michael Jordan Teach Us About Saving for Retirement – Episode 229

Michael Jordan and retirement

IRA Financial’s Adam Bergman discusses the ESPN series, “The Last Dance,” and what we can take from Michael Jordan and put to use when it comes to saving for retirement.

If you’ve been watching The Last Dance on ESPN, or are a basketball fan in general, you know what a fierce competitor Michael Jordan. Everyone can take his passion and desire to save better for retirement. His fierce competitiveness was not only evident on the court, but in his personal life. The “Win at All Costs” attitude can be taken into your business lives and other finances. What does Michael Jordan and retirement savings have in common. Read on and listen to the podcast!

Michael Jordan and Retirement

What can you take from the great Michael Jordan and put to use in your life? Here are three things to focus on:

Just Win Baby

The pure desire to win is first and foremost. Jordan took the Bulls on his shoulders to lead them to six world championships. That desire fueled him to be the best player on the court at all times. Losing wasn’t an option for him. He didn’t want to let his teammates, coaches or fans down. He played with his heart on his proverbial sleeve and left everything he had on the court each and every game.

Saving for retirement is very similar. It’s your job, as an investor, to make those winning decisions. Not only for you, but your family and, in some instances, your employees. You need to outwork and outsmart everyone so that you make the best possible choices. No one can make those decisions for you. Retirement is not one game or one series. It’s a career. There’s no get-rich-quick scheme. It’s a lifetime of savings and planning that will hopefully pay off when your (working) career is over. That way, you and your family, can enjoy a happy retirement. Even better, you can give your children and grandchildren a head start.

Trust the Process

Even those phrase was coined by another NBA team, trusting the process works for any team (or retirement saver). As a player, Michael Jordan needed to trust his owners, coaches and trainers in building both Jordan as a player, and the Bulls as a team. Without trusting the process, Michael Jordan may just have an asterisks next to his name. Ask Mr. Bergman, a diehard Knicks fan, about Patrick Ewing, one of the best to ever play who never hoisted the Larry O’Brien trophy.

Trusting the process is paramount to retirement savers. Mainly, because the system works. Every American is afforded a tax-advantaged way to save for retirement. This may be from a workplace plan, such as a 401(k), or an individual retirement plan (IRA). If you don’t trust the process, you’re destined for failure. For example, if you see the recent hits to the markets due to the COVID-19 pandemic, you might’ve decided to withdraw all your money. That will only hurt you in the long run. The markets always correct, and over the long haul, they will generate a pretty decent return. Certainly far better than you can get outside of a retirement plan.

Use Your Tools

Obviously, not everyone is created equal. Michael Jordan has done things on the court that most people couldn’t even dream about (Remember that foul line dunk?!). You might not remember that Jordan got cut from his HS basketball team. Instead of giving up, he trained harder until he lived and breathed hoops. He excelled at UNC in college and the rest was history. Everything fueled his desire to win. For example, finishing second to Karl Malone in the MVP voting one year. When asked what fueled him during the 1997 Finals, Jordan said, “Karl Malone getting MVP.”

While you may not be blessed with a good jump-shot or have two left feet, there are tools available to you to better prepare for your future. As we just mentioned, the retirement system works, if you utilize the tools available. The two main benefits of using a 401(k), IRA or similar retirement plan to save are tax deferral and compound investing.

Tax Deferral

Tax deferral means you don’t pay taxes on the money you contribute to your retirement account. That means you get a tax break every year you put money away for your future. For example, if you earn $50,000 and contribute $10,000 to your workplace 401(k), you will only be taxed on $40,000 worth of earnings when you file. Those taxes are deferred for as long as the money stays in the plan, whether it’s five years or 50. Keep in mind, starting at age 72, you are required to start withdrawing from most retirement plans.

A bonus tool is known as the Roth option, which ups the ante on tax deferral with tax-free gains. A Roth 401(k) or IRA is funded with after-tax money. There is no upfront tax break. However, all qualified distributions are tax free! If you contribute $100,000 to a Roth over your lifetime and it grows to $1 million, that entire seven figure balance can be withdrawn with zero taxes due!

Compound Interest

Compound interest has been described as “the Eighth Wonder of the World” by Albert Einstein and Warren Buffett. Essentially, the returns you make on your investments, get reinvested and grow exponentially. In simplest terms, if you invest $10,000 and you earn 10%, you will have $11,000. The next year you earn the same 10%, but on your total $11,000 balance. Every year, your balance grows.

Just think of yourself on a snowy hill with a snowball in hand. If you go partway up the hill and roll it down, it will grow a little bit bigger. Obviously, the higher you go, the bigger your snowball will get. If you go to the very top of the hill, your snowball will be huge by the time it reaches the bottom. The top of the hill represents your first job and the bottom is your retirement. If you start putting aside money in a favorable tax account right away, the more money you will earn and the sooner you can retire.

IRA Financial and You

IRA Financial believes it’s up to each individual saver to choose his or her own path. There’s no draft and no plan administrator or custodian will trade you to another. Therefore, the ball is in your hands. It’s up to you to decide what company to use and who is on your team (financial advisor, accountant, etc.). We feel all investment decisions should be made by the client. Because of that, IRA Financial will never sell you a product or limit your choices (unlike most financial institutions).

Look to Michael Jordan for your retirement strategy. Self-Directed retirement accounts are the only true way to save for retirement, and properly diversify your holdings. With checkbook control, all investment decisions are up to you. You never need to ask permission to invest YOUR money. Give us a call at 800.472.0646 for more information about our self-directed plan solutions!

As always, thanks for listening to the latest Adam Talks podcast. Be sure to check out our SoundCloud page for all of our episodes. You can also find us on iTunes and Spotify! Stay tuned, we will have a bonus podcast posted here on the blog later this week.

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