The Mystery Shopper’s Manual

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Although you will not get rich through mystery shopping alone, there are strategies you can follow to turn your mystery shopping income into a fortune. No, it is not a trick, it is not illegal, and it will not happen overnight. However, the money you make as a secret shopper can make you wealthy. Here is how . . .

When you invest a dollar today, the “magic” of compound interest turns it in to many dollars in the future. You can increase those benefits even more by taking advantage of tax breaks available with IRAs, 401(k)s, Roth IRAs and other tax-favored investment plans. As a self-employed independent contractor, these retirement accounts and others are available to you.

Many mystery shoppers have other jobs and shop for “extra” money. Whether mystery shopping represents a significant portion of your income or just “pin money,” if you save at least a portion of the money you make from mystery shopping you may be able to amass a fortune over the years.

If you were to invest $2000 a year for 35 years, earning a 6% return, you would have $189,127 at the end of that 35-year period. (That assumes you pay taxes at the 15% rate.) Invest in an IRA and, because you would not pay taxes each year on your investment earnings, you would have $230,992.You may think that you do not have enough money to save or invest. In fact, you can not afford NOT to. Could you find a “spare” $5 a day? Over the course of a year, that is nearly $2000. You might get the money to invest by making a little more money (working a few extra hours each week, or taking on a few more shop assignments), cutting your expenses (Do you really need that $4 cup of coffee?), or by selling things you no longer want or need. Or by doing some combination of these things. Small changes can add up to big results.

Have the money automatically deducted from your paycheck (if you work for an employer) or from your checking account. When you do not have the money, you can’t spend it and you probably will not even miss it. Out of sight, out of mind.

Once you have committed to saving for your future, you need to decide where to put your money and how to invest it. Not all IRAs are the same. Traditional IRAs allow you to take a tax deduction for the amount of your contribution. That means that (if you are in the 15% tax bracket) putting $2000 in a traditional IRA only “costs” $1700. That is because you could take a deduction for the $2000 contribution and your taxes would be reduced by $300 ($2000 X 15%). The money compounds without any tax liability until you take it out at retirement (age 59-1/2 or later). At that time, you pay income tax on the money you withdraw based on your tax bracket at that time. Roth IRAs do not give you a current tax deduction, but you may withdraw the money at retirement without paying taxes.

In most cases, the easiest thing to do is to open an IRA (traditional or Roth) with a brokerage, mutual fund company or even your bank. Some have a minimum deposit requirement, such as $1000, to open the account. However, others have no minimum or will waive it if you commit to making regular deposits, such as $100 or $200 a month.

All of the options available can be confusing, but do not let that stop you from doing something. Do not be so worried about not making the best choice that you do nothing–that is the worst possible choice.Roth IRAs also give you more flexibility. If you withdraw money from a traditional IRA before reaching age 59-1/2 (except in some narrowly-defined circumstances) you have to pay income taxes on the withdrawal, plus a penalty of 10% of the amount withdrawn. That means that any money you put in a traditional IRA should be considered untouchable until retirement. On the other hand, you may withdraw your contributions from a Roth IRA without taxes or penalties. That applies only to the amount you contributed, though. If you withdraw any of the investment earnings, those would be subject to income taxes and the 10% penalty.

The choice of traditional or Roth IRA is up to you. There is not a single choice that is right for everyone. Kiplinger’s has a good article about opening your first IRA that explains some of the options.

The best time to start saving is always “today.” Even if you think you are too young to think about retirement, or too old to save anything before retirement rolls around. Even if you think you don’t have enough money to save, or that you will be able to live on Social Security (if you can call that living). Even if anything. Start now to guarantee a better future for yourself.