If you want to boost your financial returns, try applying one of my favorite chess tactics – the chess fork – to managing your money.
What is a chess fork, and how does it work?
When a chess player forks his opponent, he moves his piece to a strategic square, threatening two of his opponent’s pieces at the same time. Since his opponent cannot save both threatened pieces simultaneously, the chess fork gives its player a distinct advantage.
A chess fork can help you achieve two goals through a single action, as illustrated by the expression: “Kill two birds with one stone.”
In finance, this can be compared to enhancing one of your assets so that it fulfills two or more of your financial goals. In this way, you receive multiple benefits from a single investment.
Enhance your retirement funds
One great way to make your assets work double-time for you is to put money into an IRA or a 401(k). These retirement plans are similar to the concept of a using a fork in chess, since a single action reaps multiple benefits:
- You get a current tax deduction – the money you put into the retirement plan lowers the amount of tax you pay today.
- Your money grows tax deferred – if you put money into an IRA or 401(k), you are only taxed on the profits when you withdraw any funds. Then, you are only taxed on the amount that you have withdrawn, not what remains inside the account. By leaving your money to grow untaxed, you will gain more.
- If you have a 401(k) plan from your employer, and he matches your contribution, you can consider the employer’s contribution “free money.”
This list gives just a few examples of possible profitable outcomes from investing in an IRA or 401(k).
As long-term retirement plans, IRAs and 401(k)s are a great opportunity for increasing your financial returns. To learn more about retirement and retirement success, view this short video about rules for early retirement success.
Take advantage of other, similar investment opportunities through which you can achieve two goals with one action, both on the chessboard and in real life.
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing, is an avid chess fan, international investment advisor and Certified Financial Planner.TM