WSJ.com wrote this great article about the number of 20-30 year old’s who are abandoning their 401K plans at work because of the turmoil in the markets. This is unfortunate. I don’t know when the stock market will turn around but I am willing to bet my life savings that by the time I am ready to retire (in 20+ years) the market will have returned and appreciated many fold.
Here’s why NOT participating in a retirement plan during your early years can become a million dollar mistake:
Let’s compare a person who starts at the age of 23 versus 33. We’ll assume they’re each able to save $200 per month, will retire at 65, and will earn a 10% return on their investments.
By the time they each reach the age of 65 here are the results:
Started at 23: $1,561,776
Started at 33: $561,667
Those 10 years cost the latter individual over $1,000,000. OUCH!
Lesson: Don’t be discouraged by market fluctuations, sign up for your companies 401K and forget about it!