Many of the brightest and hardest-working marketing and advertising people in the country are obsessed with getting you to spend money and, if necessary, to go into debt to do so. Absolutely all the media that reach you every day are designed to get you to spend money. In order to save money in this environment, you will need determination to withstand the constant pressures to spend now.
 

What is it that separates those who are successful from those who are not?

Successful individuls have a strong personal vision of what they want and why they want it. That vision gives them the strength to stick to their strategies even when doing so is uncomfortable. It gives them the determination to persist when they are discouraged. This is the same characteristic of women entrepreneurs that makes their small businesses successful.

The Solo 401k Plan

Today, the Solo 401(k) plan has become the main investment vehicle for working women to save for retirement. But many don’t take full advantage of their plan, and this could leave them with a lot less at retirement. Here are some steps we believe you can take to improve and eliminate any retirement worries about: Whether or not your retirement will be luxurious or subject to public charity, andwhether you will have the freedom to spend with your family or friends

1. Increase your contributions to the maximum that you can manage. Many workers contribute just enough to take advantage of their employer’s matching contributions, and then they stop. By adding more to your account, beyond the matching contributions, you’ll end up with more in retirement.

Do it even if you must cut back on your current spending. You will not regret it. Ten years from now, you’ll know that those extra dollars have been working for you. If, instead, you spend the money, the chances are slim that you’ll even remember where that money went.

2. Invest at the start of each year instead of taking a little bit out of each paycheck. Nothing in the law says you have to invest in a 401(k) plan a little at a time, from each paycheck. If you’ve got some available cash for living expenses, change your contribution levels and then invest all your pay (or whatever percentage is workable for you) until you have reached the maximum allowable 401(k) contribution for the year; $16,500 in 2009. By investing early, you’ll put your money to work sooner for your benefit.

3. Afew years ago it was reported that more than 30 percent of the money in 401(k) plans was invested in money-market funds or similar accounts. For investors nearing retirement, that may be appropriate. But most workers in their 40’s and 50’s need growth in their retirement investments. Put more of your investment fund in equities and less in money-market funds.

Money-market funds provide only stability. Think of it as money that preserves its value. Money-market funds have virtually little risk, so every dollar you put into them will be there whenever you need it. But over the years, money-market funds can be expected to return only 4 to 6 percent annually. Lately, that has been enough to keep up with inflation, but it hasn’t done much more than that.

Over the years, you can expect equity investments to return at least 11 percent. Over several decades, that difference is awe-inspiring.
 

• If you invest $10,000 a year into a 401(k) plan at 5 percent, it will be worth about $693,549 in 30 years.
• The same $10,000 compounded at 11 percent for 30 years would be worth $2,337,100.

Look at it his way: for every $1.00 you invest at 5 percent, you get back $2.31. At 11 percent, you get back $7.79.

4.  Research indicates that over long periods of time, small-company stocks outperform large-company stocks.

Since 1926, $1 invested in an index of the stocks of large, relatively mature companies has grown to be worth more than $2500. And $1 invested in an index of stocks of smaller public companies has grown to be worth more than $5,500. In the equity part of your portfolio, shift some of your money into funds that invest in small companies. Don’t put your entire equity portfolio in small-company stocks. But consider investing at least 25 percent of your U.S. equity investments in that fund.

5. Numerous studies have shown that value stocks outperform growth stocks.

According to data going back to 1964, large U.S. value companies had a compound rate of return of 15.1 percent vs. only 11.4 percent for large U.S. growth companies. Among small U.S. companies, the difference was even more striking: a compound return of 17.4 percent for the value stocks vs. 12.1 percent for the growth stocks. In the equity part of your portfolio, shift some of your money into funds that invest in value companies. These are companies that for various reasons are regarded as under priced. Don’t put all of your equity portfolio into value stocks. But if there’s a value fund available to you, consider investing at least 25 percent of your U.S. equity investments in that fund.

6. Rebalance your portfolio once a year. Your asset allocation plan calls for a certain percentage to be invested in each of several kinds of assets.

Assume you have half your portfolio in large company stocks and half in small company stocks. Once a year, exchange assets between the funds to restore that 50/50 balance. This means selling some shares in the recent "price gainers" and buy shares of the recent "price losers." Had you invested equally in an index fund of those two types of stock for the 70 years from 1926 through 1998 and never rebalanced, your rate of return would have been 11.9 percent. Had you rebalanced every year, your rate of return would have been 14.0 percent.

Those details are more significant than it might appear;
 
               An investment of $1,000 would have grown in that period to $5,043,199 at 11.9 percent, without rebalancing.

               With rebalancing, the same investment would have grown to $22,508,614.

Rebalancing restores your asset balance and allows for the possibility that last year’s losers may be this year’s gainers. It’s buying low and selling high.

Over the years your portfolio could become seriously out-of -alignment if you don’t do this and you’ll have much less of the mix that you can count on for better long-term returns. Diluting your diversification actually increases risk in your portfolio over time, which is a result that’s just the opposite of what you want.

7.Without compromising proper asset allocation – remember, that’s the most important set of decisions you make – use the funds in your plan that have the lowest operating expenses. If the equity funds in your plan have relatively high annual operating expenses, ask your plan administrator to add funds with lower ones.

Every one-half of a percentage point you can shave off of operating expenses is an additional one-half of a percentage point of return. That means the money is working for you, not a mutual fund company.

These little differences add up to serious money over time.

If you contribute $10,000 a year for 30 years and it compounds at 10 percent, you will wind up with $1,644,940.

If it compounds at 10.5 percent, you’ll have $1,808,815.
If you withdrew 8 percent of your retirement nest egg annually, the difference could mean an extra $13,000 income to you in retirement.
 
Choose funds with low turnover in their portfolios, or persuade your plan administrator to add new funds with low turnover. This will further reduce your funds’ costs – and therefore improve your return – in addition to what you save in lower operating expenses.

8. Don’t borrow or make early withdrawals from your 401(k) unless that is the only way to respond to a life-threatening emergency. You’ll get the maximum benefit from your plan by keeping the money working for you as long as possible It’s terribly tempting for some people to borrow from their retirement funds, but it’s much harder to pay the money back than it is to take it out. And even if you repay it faithfully, in the meantime you lose that money’s ability to work for you. Furthermore, if you take an early withdrawal before you are 59.5 years old, your withdrawals will be subject to a 10 percent tax penalty (in addition to regular taxes) unless you are disabled. Just don’t do it.

9. If you shut down your company, you’ll get a chance to roll over your 401(k) into an IRA. Take that chance. In an IRA, you have the same tax deferral as a 401(k), and you’ll have the flexibility to invest in virtually everything you can get in a 401(k),.

10. Here’s the most important thing to do to maximize your 401(k): Keep your contributions automatically payroll deducted , and make them no matter what. It’s simple, but it’s not easy. Half of the households in the United States have net worth of $25,000 or less. In a typical year, about two-thirds of U.S. households do not save money.

Remember, to be successful, first, imagine your early retirement goal: $1,127,376.04, the Caribbean condo, the yacht, the new Lexus. Luxury and pleasure as far as your eye can see. Create a strong vision, and then don’t let go. The power of a clear, strong vision applies to more than your retirement savings. Let your vision shape your life, instead of the other way around, and all of the free time in the world can beyours.

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