The Cab Driver and His Retirement Plan | Ed Slott and Company, LLC

The Cab Driver and His Retirement Plan

By Beverly DeVeny, IRA Technical Expert
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@BevIRAEdSlott

As Jeff noted in his blog earlier yesterday about 3 ways IRAs are not like casinos, we are in Las Vegas for our 2-Day IRA Workshop, Instant IRA Success. On my way from the airport to the hotel upon arrival, my cab driver asked me what I do for a living. That started an interesting discussion on retirement plans for cab drivers.

He was an older man who said his cab company had a retirement plan for its drivers, but there was no employer match. It was only the driver’s salary deferrals. Therefore, he was not participating in the plan. He didn’t see a lot of benefit since there was no match. Besides, his son, the MBA, said not to bother. Who can argue with that?

He also said that a lot of the cab drivers have no retirement plan. Many are paid in cash. It is not uncommon for them to take some of that cash, go into the casino, and put a sum on red or black. That’s the Las Vegas version of a retirement plan. It is probably the best loser there is.

Don’t let this be how you prepare for retirement. If your employer offers a plan, sign up - even if there is no employer match. At least you are saving something. If there is an employer match – use it. Defer enough of your salary to get the entire match. It’s like free money.

If there is no employer plan, then contribute to an IRA or Roth IRA. There is an old saying, pay yourself first. If you don’t want to use an IRA, then save in a brokerage account, a savings account, CDs, or somewhere. Everyone needs to save for their retirement. There are fewer and fewer pension plans and Social Security may or may not be there. You are on your own.

 

 

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