Many people never realize the benefits of starting and maintaining a solid retirement plan. This especially applies to young adults who do not think about their future. The simple fact is that the earlier you start saving for retirement, the more comfortable your lifestyle will be when you are living your senior years. For those who neglected to start a retirement account at a young age, the amount they will retire with is significantly lower, because the money doesn’t have time to grow. You have many options with where you should be putting your money, but as a general rule of thumb, if your company provides the option to match your 401k contributions, you should take full advantage! Sure you will take home less money each week, (usually around 8 percent) but you will be happy when you are in your 60’s sitting on an account with millions of dollars in it. Don’t believe me? Read on…
Exponential 401k growth
Even if you work in a lower paying field, you should always take advantage of your 401k if the company offers it. Here’s an example. Let’s say you are twenty five years old, and you have a job where your employer matches 50% of your contributions up to 6% of your salary, you make $40,000 per year, and you plan on contributing the full 8%. If you stay at this $40,000 per year salary and never get a raise, with an average rate of return, at the age of 65 you will have a little under one million dollars in your retirement fund. You can check out this website, 401k Calc, for proof that these claims are true. The amount of money that you end up with decreases significantly the later you start saving, so it’s always wise to get these accounts rolling as early as possible. However, if you are in your middle-ages and thinking about retirement, there is still hope, but you’re going to have to set aside a larger amount of money to contribute if you want to retire comfortably. This is also assuming you never get a raise, and make 40,000 per year for forty years. Usually employees get raises. Let’s say you get a 3% raise every year until you retire, this number will increase 350,000 dollars. As you can see, any contribution you can make to a 401k is substantial. If your company matches over 50%, which many do, this number will increase even more.
If you earn higher than 40,000 a year and you contribute to your 401k as early as possible, there is potential for several million dollars to be available in your retirement when you reach your golden years. Think about the possibilities. You could move to Florida, buy a house on the beach, and go out to eat for every meal. Your family will be secure and you will probably be able to pay for the education of your grandchildren. You can drive the cars you want, and travel freely. Getting rich takes time, so be patient, keep investing, and soon you will be living the high life.
Anyone can contribute to retirement
Even if you work for low wages, you should still contribute to your retirement. Most large companies offer these benefits for their employees. Even a small contribution each week can lead to a solid retirement account. Take advantage of employer match, because it’s free money! Don’t be scared and if you are unsure about what your company offers just ask one of your managers. Someone will be able to guide you in the right direction. Also, if you decide to leave your place of employment, your 401k will remain intact and you will still receive it when you retire. So, it is always a good idea to contribute, and you should start as early as you can.
Matthew Welch
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