Mechanism For Efficiently Making Contributions

If you are a participant in a pension or profit-sharing plan, you will make no employee contribution and you can't control the timing of the employer contribution being made on your behalf.  If you are a participant in a Section 401(k) plan or Section 403(b) Annuity, you yourself must initiate contributions to the plan.  Those contributions will be made through salary reduction via payroll withholding.  Your employer will immediately forward your payroll withholding to your plan investment and dollar-cost averaging (discussed below on page 82) is assured.

How about other investments, such as IRAs?  Some employers are very helpful to the employee in implementing a "forced savings plan."  That is, an employer-sponsored plan is not involved, but the employer will allow its payroll department to make payroll withholdings in order to fund a Roth or traditional IRA contribution or to purchase a U.S. Savings Bond out of each paycheck.  This is very helpful in disciplining yourself to make these payments and assuring efficient dollar-cost averaging.  The idea is if we never see the money we won't have an opportunity to spend it.  Always pay yourself first.

How about the many other situations where we don't have such an employer-assisted forced savings mechanism to rely on?  Now we go back to the budgeting concept analyzed at the beginning of the book (page 4).  As you put together your recurring monthly expenses, you factor in a monthly contribution to your IRA.