A great underdog story
We all love a good underdog story. Even those of us who know nothing about horse racing have been fascinated by the results of the recent Kentucky Derby. In just the sixth race in his life “Rich Strike” won the super bowl and world series equivalent in the great race as an 80-1 long shot! The 3-year old, purchased for just $30,000 in September of 2021, paid $163.60 on a $2 bet to win. In a “made for movie” fashion he was in 17th place out of 20 horses halfway through the race. His equally unknown owner collected a payout of $1.86 million for the win. Rich Strike was ineligible to run at all until the day before the Derby when another horse was scratched from running. What a storybook, exciting event to take your mind off the stock market-if only for a couple of minutes*. We all love a good “Cinderella Story”!
Back to our lives, last week I reflected on the large number of Americans who are worried about having sufficient funds to maintain their lifestyle in retirement. Times like this tend to cause that sort of concern. That led me to surprising and unsettling data. For example, the 401k Plan has emerged as a primary tool for employees of corporations who offer a Plan to accumulate a nest egg to rely upon in their golden years. Now, all 401k’s are not created equally, though most have some sort of corporate employer match. That is a percentage which is contributed by the employer on the participating employees’ behalf. For example, in many plans the company matches 25%, 50%, or even 100% of the contributions made by the employee up to a certain cap. That is incredible! Suppose the match is only 25%, that is a guaranteed 25% rate of return on the employees’ contribution up to the cap. Where can anyone get that?? Not to mention all the contributions to a traditional 401k are pre-tax and will accumulate tax free until they are withdrawn. Presumably, at retirement the average worker will be in a lower tax bracket (though obviously not always) and that can be a great time to withdraw and pay taxes on your retirement income. That is all well and good. However, according to the Congressional Research Service only 8.5% of workers who have access to an employer sponsored 401k plan contribute the maximum amount permitted by law. Only 8.5%!** Let’s hope some higher percentage at least contribute enough to maximize their employer match. If you have a family member, friend, or colleague who is not taking advantage of this savings tool please encourage them to consider it. Their financial future may depend on it!
In closing this week hate to end on a sad note, but we’ve at last passed a milestone. The death toll attributed to Covid-19 has surpassed 1 million in the U.S. *** To make it worse, all news outlets are reporting new surging cases around the world-and in various states in the U.S. It certainly appears that the “new normal” we often discuss will include living with ever evolving mutations of the virus. We seem to have a high degree of immunity, new treatments for existing cases, and the death rates/hospitalizations are off their peak levels. However, I’m betting that history will reflect that it has been a horrifically expensive time- emotionally, financially- in just about any way one can look at it. Whether one died directly from the virus, or perhaps it was in conjunction with other underlying health issues, it has simply been a travesty. Certainly not America’s finest hour. One can only hope we have learned a few things which will serve future generations well in some fashion-whether it be about politics, financial systems, work habits, basic cleanliness, virtual communication, the impact of social isolation-whatever! I’m sure, regretfully, we’ll get to revisit this topic again and again.
The opinions, forecasts, and views expressed here are those of Tommy Williams and do not necessarily represent those of Williams Financial Advisors, Private Client Services, RFG Advisory, their employees, or their clients.
This material is for educational and informational purposes only. It is not legal, tax, or investment advice, nor a recommendation to buy, sell, or hold any specific security, nor an endorsement of any specific trading strategy. Always consult an attorney or tax professional regarding your specific legal or tax situation.
Securities offered by Registered Representatives through Private Client Services, member FINRA/SIPC. Advisory products and services offered by Investment Advisory Representatives through RFG Advisory, a Registered Investment Advisor. RFG Advisory, Williams Financial Advisors, LLC, and Private Client Services are unaffiliated entities. No advisory services may be rendered by RFG Advisory unless a client agreement is in place.
*www.si.com/horse-racing/2022/05/08-in-result-no-one-saw-it-coming-rich-strikes-kentucky-derby-win-helps-redeem-racing.
**google.com/search?9=congressional+research+what+percentage+of+workers+max+out+contribution+to+401k&source
***nytimes.com/interactive/2021/us/covid-cases.html
This article originally appeared on Shreveport Times: A great underdog story
