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A life well-lived is one where you look back years later with no regrets. “If I had it to do all over again,” you say to yourself, “I would not have changed a thing!” Yeah, that’s great, but you won’t be hearing that from me anytime soon. I was around when the Internet became the next new thing, and I could have registered the domain name “Tom.com” for about five bucks. After all, my name is Tom. Someone else beat me to the punch and the domain name sold for more than $2.5 million back in 1999. I also toyed with the idea of buying shares in Google when they were first issued in 2004, for $88 each. That seemed a little pricey to me. This week those same shares are worth $888.
A friend of mine has a similar tale. She was only 17 years old when she decided to make a brilliant financial move and open a ROTH IRA account. The ROTH is one of the most user-friendly kinds of retirement accounts there is and it offers phenomenal potential to grow a nest egg. She mentioned her forward-thinking idea to her parents, who should have been absolutely thrilled. Instead they told her, “You’re only 17, don’t worry about retirement, enjoy your youth! Why don’t you get a credit card instead and have some fun? Shop at the mall!” Now that she’s in her early 30's she’s kicking herself for taking that horrible advice. Instead of running up debt on her plastic she could be nearing retirement by now thanks to her ROTH savings.
The good news is that there is still time to do the right thing and there are some credit cards that are ready to help you in that regard.
Perhaps the most well-known is the American Express Fidelity Retirement Rewards Card.
- You get all the perks of carrying an Amex card – including superior 24-hour customer service, zero liability fraud protection and emergency and travel assistance.
- If you direct your rewards into your Fidelity retirement account you will earn a big 2% on all your purchases. That’s twice as much as you are rewarded with most cards for across-the-board spending.
- Rewards are swept into your retirement account, making retirement saving easy and automatic, especially if you are not very disciplined about saving.
- There are no annoying limits on your rewards and you don’t have to pay an annual membership fee.
Too bad my friend’s parents didn’t sign her up for this particular card back in the day, huh? She could have had her cake and eaten it too, by enjoying the teenage fun and freedom of a credit card while also fulfilling her goal of funding a retirement account.
One of Fidelity’s Wall Street competitors, Merrill Lynch, also offers a similar kind of plastic that can be IRA-connected.
- If you have a retirement account with Merrill Lynch the cash back rewards can be directly deposited into that linked account.
- You earn 1.25% cash back on virtually all purchases, with no cap on how much cash you can earn.
- There is also no annual fee and no preset spending limit.
Pros and Cons
Many savers out there will point out that by carrying one of these cards you are getting locked into a particular retirement account, especially with the Amex Fidelity. To earn those sweet 2% rewards you have to have a retirement account with Fidelity. With the Merrill card, by contrast, you can elect to receive your rewards in the form of check that you can use it any way you like, so you don’t have to participate as a Merrill Lynch retirement account customer.
Still, you could get some other kind of card that also pays robust cash back rewards and fund a different type of retirement account, if you want. That way you are not tied to the credit card company’s financial institution, which may charge fees to manage your accounts. You could also use your cash savings to invest in gold, real estate or buy savings bonds.
If you don’t like the idea of limiting your retirement account options to Fidelity or Merrill, then maybe these cards aren’t for you. But, if you don’t have the self-control to skim your cash rewards off the top and sock them away in a safe account where they will grow your wealth for retirement, these cards would be a great asset.
The goal, remember, is to wake up years from now with no financial regrets – even if you did fail to buy shares of Apple when they were cheap, back before they invented iPods, iPhones and iPads.
Editorial Note: This content is not provided by American Express. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by American Express.
*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.