Most American workers generally understand that Social Security monthly paychecks will one day significantly contribute to their future retirement income.
But because those Social Security benefits are not by themselves enough to provide people with the financial resources they need to live on comfortably, most also recognize that 401(k) plans and IRAs (Individual Retirement Accounts) are additional tools necessary for securing their financial future.
However, finding the extra money to contribute to these accounts can be a significant challenge.
Kevin O’Leary, a prominent entrepreneur and investor widely known for his appearances on ABC’s “Shark Tank,” shares a method that enables workers to cut expenses and direct more money toward their 401(k) and IRA savings.
He also offers a stark financial warning.
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Participating in an employer-sponsored 401(k) plan is a dependable way to build retirement savings, especially when employers offer matching contributions.
With automatic payroll deductions, this method allows employees to invest in their future effortlessly, making it both practical and efficient.
Related: Jean Chatzky sends strong message to Americans on Social Security
IRAs, on the other hand, provide a wider selection of investment options not typically available through 401(k) plans. However, they require more hands-on management, as individuals must open an account and set up automatic contributions independently.
In addition to a major warning, O’Leary offers valuable advice on how individuals can cut costs and increase their retirement contributions, which for many Americans primarily consist of 401(k) plans.
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Kevin O’Leary warns Americans on money for 401(k) plans
Many workers who are committed to contributing as much money as they can toward their 401(k) plans find it difficult to do so because their spending habits leave little left to put away for the future.
In fact, O’Leary emphasizes, many people spend more than they make —
and are working in large part to finance their debts and pay their bills.
“You are in constant fear of losing your job, or of your assets losing their value. You worry that one big, unexpected bill might put you under for good, and then you avoid that thought,” described O’Leary in his book, “Cold Hard Truth on Men, Women and Money.”
“You’re avoiding the phone and people to whom you owe money. Maybe you’re retreating from friends and family out of fear or shame,” O’Leary continued. “You’re steeped in magical thinking about money — for example, believing you’re one lottery ticket, inheritance, or windfall away from total financial transformation.”
“You wake up in despair and you go to bed defeated. You don’t live within your means because you don’t even know what they are.”
More on retirement:
- Jean Chatzky shares major statement about Social Security
- Dave Ramsey sounds alarm for Americans on retirement
- Scott Galloway warns Americans on 401(k), US economy threat
O’Leary explains that people who feel this describes them to any degree should correct it immediately. He offers a first step people can take to get a handle on where they stand financially.
Related: Dave Ramsey warns Americans on Social Security
Kevin O’Leary explains one way for Americans to increase 401(k) contributions
In order to increase retirement savings and add a larger percentage of their income to 401(k) plans, people first need to get a good feel for where they are financially.
O’Leary suggests simplifying money management down to a single figure — either positive or negative. He encourages individuals to calculate their total earnings over three months, calling this their 90-Day Number.
The process starts with identifying income. If pay stubs aren’t easily accessible, reviewing bank statements can help track all incoming funds, including salaries, side jobs, and other sources of cash flow.
Next, he recommends listing all expenses separately — small purchases such as coffee, clothing, and snacks, as well as major costs such as bills, debt payments, rent, and car loans.
The key step is subtracting total expenses from total income.
If the result is positive, the individual is in good financial shape and can immediately consider increasing their 401(k) contributions.
A negative outcome signals a need for adjustments. The extent of necessary changes depends on how much spending exceeds earnings, requiring smarter budgeting to create space for investments in long-term financial security, O’Leary explains.
In the latter instance — after some planning, budgeting and hard work — a person can still reach the point of increasing investments in their 401(k) plans.
Related: Dave Ramsey sends major message to Americans on IRAs, Roth IRAs
