You're losing $300,000 by not using a retirement account.
Many of us are given a phenomenal opportunity by our employers to get free money. That's right...free money.
401(k) Matching
You see, many employers offer a 401(k) match. That means that they will match, dollar for dollar, the amount that you put in to your 401(k). This will be done up to a certain percentage. For example, your employer may match 100% of your contributions for up to 5% of your salary.
This means that if you make $100,000 per year (no, I don't expect you to be making this much, but 100k is an easy number to do math with)
You contribute 5% (aka $5,000) to your 401(k)
Your employer matches it
You put $5,000 into your account, and your employer puts in $5,000 of their own. It's free money!!!
My Dad has told me many times that he always regrets not taking advantage of the match that GM would have given him. He didn't think he had enough money...it's a pity, because even $50 per month back then (from age 23-28) would be worth $100,000 today. That's right, I'm not kidding - $100,000!!!
If you are not taking full advantage of your employer's match, then you are missing out on free money, and need to stop missing out immediately!!!
What if my Employer doesn't offer a match?
First of all, they may well offer a match, and you just don't know it. Find an HR representative and ask them about it, or consider asking a co-worker who has been around for a while. I know that even some fast food restaurants offer a match.
Either way, you should be saving for retirement as soon as possible!!!
I'll spare you the math, but I'll give you the answers.
If you contribute $50 per month (I bet you can afford it), then you will make a ton of money!!!
Example
Let's say you are going to contribute $50 per month for 10 years only (that's a total of $6,000 in 10 years)
If you start at age 20, you'll have $150k when you turn 65.
If you start at age 25, you'll have $100k when you turn 65
If you start at age 30, you'll have $67k when you turn 65
Do you see how just a few years makes a huge difference? You're putting in the same amount of money overall, but you are making as much as 100% more!!!
If you just don't wait, and begin putting something in to your retirement account, you can make an extra $90k by sitting on your ass.
Start now...for every minute (well...month) you miss out, you are missing out on real cash!
What do you do?
Step 1: Ask your HR employer or co-workers if your job offers a 401(k) match (even some fast food restaurants offer this...seriously, just ask)
Step 2: Contribute enough to get your employer's match
Step 3: If you don't get your employer match, at least begin putting in $50 per month ($100 is better, but $50 is fine...if all you can afford is $25, then go with that!)
If you don't have access to a 401(k), then open up a Roth IRA. There is plenty of documentation on the internet about this...I use Fidelity for mine. That is not going to be covered in this post.
Resources:
- If you have questions, e-mail me! Paul@Padorec.com
- A great, and easy to read book is I Will Teach You to be Rich by Ramit Sethi
- If you'd like to play around with your own calculations, use www.dinkytown.net
Like I said, I am trying to keep this short, so that's all!
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