My 21 year old niece just became eligible for the 401k plan at her office. “What do I do” she asked. “I’m just starting out – do I start now or wait?”
Well, the question is definitely a good one. At her age, she’s just getting started and has a lot of living to do. But starting a good savings habit now will only pay off in the future. Learning to live on a little less is easier when you start at a young age.
Plus, if your company matches any percentage for you – and you don’t invest – you’re turning down free money.
All I can say is NEVER turn down free money. Save as much as you can to the limit your company matches. If they match up to 6%, put in 6% if you can. If they match 4% put in 4%. It’s like getting a nice bonus each and every year.
I went looking for information on the benefits of starting retirement saving early.
Here’s what CNN Money has to say about it:
“Say you start at age 25, and put aside $3,000 a year in a tax-deferred retirement account for 10 years – and then you stop saving – completely. By the time you reach 65, your $30,000 investment will have grown to more than $472,000, (assuming an 8% annual return), even though you didn’t contribute a dime beyond age 35.
Now let’s say you put off saving until you turn 35, and then save $3,000 a year for 30 years. By the time you reach 65, you will have set aside $90,000 of your own money, but it will grow to only about $367,000, assuming the same 8% annual return. That’s a huge difference.”
So – first let me start by saying $3,000 a year is just $250 a month – or $62.50 per week. But think about it… by starting now and saving for 10 years – you would actually have more money at retirement age than if you actually saved for 30 years.
And if you continue to save, your money will really grow.
Seems like a no-brainer to me.