I may have mentioned before how I did hundreds of cold calls a day when I started in this industry all those years ago. I won’t bore you with my cold-calling stories, however, there were lots of things I learned from talking to so many people. The one thing I learned that I wanted to talk about today involves flower pots. Stick with me here.
A common refrain when talking to people on cold calls was along the lines of – “I already invest. I have an IRA (pronounced like the first name Ira).” Because I was an annoying-ass cold caller I would ask follow-up questions, such as what they are invested in within the IRA. That usually brought a response of either silence or “It’s my Ira.” Long story short – the end result was they put money into an IRA and usually just left it in cash. It was then I would quickly kick in to an educator and bust out the flower pot analogy.
Your 401ks, 403bs, IRAs, Roth IRAs, 457s and more are investment vehicles. These are all designed for your retirement funds. What’s important to realize is they are just the shell your investments reside in. Or in my example, a flower pot.
Let’s use a traditional IRA as an example. Your IRA is a flower pot. Your contributions go in there as cash. Good old cold, hard cash. In this example, think of your cash as seeds. If you put seeds in an empty flower pot what happens? Odds are they do nothing or maybe just rot away over time. Is that what you really want? My guess is no.
You most likely want those seeds to grow. What do you need then? Good soil certainly would be helpful. Also, the right amount of light and water, as well as the proper temperatures make all the difference.
Your IRA is the same thing. You put your cash in there and to get the results you want you need to invest that cash. Instead of soil, water and light, you will be seeking the proper asset allocation for you. You know, so you are diversified and don’t have all your eggs in one basket (maybe one too many analogies here). Your investments should be low cost as the less you pay in fees the more that stays in your account compounding over time. And speaking of time, this is the big difference maker. While I don’t think Einstein really said that compound interest is the most powerful force in the universe, the more time you give your investments to grow the better off you will be over the long run.
So, if you are ever talking to a family member, friend, coworker or just some random person, and they mention they have an “Ira,” it may be time to become an educator with the flower pot analogy. Because who doesn’t want their retirement investments to grow over time so they can stop and smell the roses down the road. Again, probably too many analogies😉