A Young Man’s Guide to Understanding Retirement Accounts: The 401(k)

Retirement savings, the earlier the better..................

Suppose you set aside $1,000 a year from age 25 to age 64 in a retirement account that earns 5% a year (historically, stocks return about 8%, but we’ll be conservative). That’s $39,000 total you invest. By the time you turn 65, you’ll have have $126,840. If you don’t get started with saving until you’re 35, you’ll only have $69,760. Starting just ten years earlier would have doubled your total. Yes, doubled.

If you’re a young man, you’re probably not giving much thought to retirement right now. It’s understandable. It’s hard to plan and think about something that’s 40 years away (maybe many more–the traditional idea of retirement will likely undergo a lot of changes in the next several decades). Moreover, many young men put off saving for retirement because they’re intimidated by the entire process. They feel like they don’t have the requisite knowledge to get started.

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