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Pay yourself back! A lot of workers have been borrowing from their future selves in the pandemic. And it could be costing them big

Many Americans report they borrowed from their retirement in the pandemic. No judgment here. Just pay yourself back, ASAP.

DALLAS — It is that time of the year when we are in the mood to give. Usually that means giving to others. 

But it is also good to give to yourself; especially if you have taken from yourself. 

A recent survey by Bankrate found that one out of every five people who have a 401(k) or IRA cracked open that nest egg and took some out during the pandemic. 

No judgment here. Times have been challenging, and that might’ve been your only option. 

But if your financial situation is better now, start paying back the money you took from your future self. Because not only is your retirement account missing what you took out, it’s also missing all the money that chunk you removed would’ve made in the stock market, which has taken off like a rocket since hitting its pandemic low in 2020.

Reminder to check your 401(k) contributions as we begin a new year

As we begin a new year, it’s also a good idea if you have a 401(k) plan to just look and see what you are contributing. Critically, are you giving enough to get the full matching contribution from your employer (if they offer that)? 

If not, try your best to contribute enough of your pay to qualify for the maximum amount your employer matches. That is free money! 

If you pass on that, you never get back that lost opportunity. One analysis found that missing out on that employer match could cost the average American worker $333,000 over a lifetime!

Back to the 401(k) and IRA survey. It casts an especially troubling spotlight on Generation Z (as the survey lays out, you are in that generation if you were born after 1997). 

More than half (54%) of people surveyed from that group report they have never had any kind of retirement account.

Where do you even start?

Of course, some who are in Generation Z are still children, but some of them are old enough to have jobs now. If you are part of Gen Z and have a job, make sure you are participating in your employer’s 401(k) plan if they offer one. 

Or start a Roth IRA. If you don’t know how to invest, start reading about the basics of investing. 

In the meantime, you can channel your retirement savings into a mutual fund, which is invested in a broad array of different stocks. If you are in a 401(k) plan, it will have a list of mutual funds to choose from. Here and here you will find some more rankings for mutual funds.

There are also "robo-advisors" — programs that ask you a series of questions and then tailor a set of investments for your account. 

The computer program does the investing for you. Here, here, and here, you will find three sites that explain the concept a little further and suggest some of their top choices for robo-advising programs.

When my daughters were teenagers, I helped them sign up for robo-advised Roth IRAs. They set up their robo account to start investing on their behalf, and they started an auto draft of a small amount of money each month to go into the Roth IRA so it could be invested. That way, they got accustomed to making regular contributions. 

That is important because your 20s are especially critical for your retirement savings.

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