The first decision you need to make when joining the Plan is: "How much should I contribute?" Keep in mind that regular contributions to the Plan are pre-tax. This means that your 401K contributions will reduce your taxable income.
If you are already in the Plan, you may then ask: "Am I contributing enough?"
As a rule of thumb, most individuals need to supplement approximately 70% of their income at retirement for life. The later in life you start to save, the more you need to save to "catch-up".
The simplest rule to seek to ensure your “golden years of retirement” are truly “golden”: start saving now! Consider two investors – one 20 years old/the other 40 years old. Both are saving for retirement at age 65 at an 8% rate. Both save the same amount of money over their savings lifetime—that is, either $54,000 or $67,500. From the tables that follow you’ll see the benefit of tax-deferred compounding – which Albert Einstein is known to describe as “the most powerful force in the universe.”
| Monthly Contribution | Total Contributions Age 65 |
Portfolio Value Age 65 |
|
| 20-Year Old Investor No Match |
$100 | $54,000 | $527,454 |
| 40-Year Old Investor No Match |
$180 | $54,000 | $171,185 |
| 20-Year Old Investor No Match |
$125 | $67,500 | $659,317 |
| 40-Year Old Investor No Match |
$225 | $67,500 | $213,981 |
AND THEN
Have you ever said, “I’ll wait until next year.”
You should know that waiting could be one of the biggest mistakes you can make.
| $150 | $250 | $350 | |
| Cost of Waiting from Age 25 to Age 26 |
$41,856 | $69,760 | $87,665 |
| Cost of Waiting from Age 35 to Age 36 |
$18,857 | $31,429 | $44,000 |
| Cost of Waiting from Age 45 to Age 46 |
$8,496 | $14,159 | $19,823 |
This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.
Remember:
If you are unsure or would like to speak with us more about participation in your 401K Plan
call 888-558-EPIC (3742) and we’ll be glad to help.