I may be in my early 20’s, but I have already started saving for the year 2047 (if I plan on retiring at 65). I entered my first 401k plan when I was nearly 19 years old while working at America’s favorite department store “Macy’s.” I didn’t really understand the logistics of a 401k, but my older co-workers urged me to enter it and so I did.
Like most young adults in college and on a tight budget… most of us would opt out of anything that reduces our paycheck even if it’s only a few bucks. I thought at the time, it’s only a small amount (4% of my income) and may come in handy later. That tiny sacrifice of about $400 has already risen to nearly $800. Not too shabby? I definitely saw the growth in only a couple of years and that was enough to tell me 401ks are smart.
A few months ago, I entered into my current employer’s 401k plan (after waiting a year to become eligible). This time I am contributing a little more money because the company offers a percentage match. I would be a fool not to take advantage of it… it’s free money!
Most of my friends are not in 401k plans or even take advantage of their employer’s health benefits. Some don’t even know what a Roth IRA is. They think I am foolish, wasting my money... saving for a world that may not exist 40 years from now with the threat of war, global warming… etc.? I always thought better safe then sorry, but that’s probably my grandma in me.
Retirement plans can seem unnecessary when you are merely close to a quarter of a century (25 years old), but time appears to creep up quicker than we think and saving for the future doesn’t seem like such a bad idea. Now that Congress is behind the automatic 401k enrollment program, maybe more people my age will take advantage of such a grand opportunity? I wonder what kind of retirement plan Johnny Depp has after those Pirates of the Caribbean movies racked in $2.7 billion.
Comments
What a relief to see that you are making the leap to save for the future! People these days are so desensitized by television and movies, theys seem to have no concern for planning for retirement.
I happen to believe you can do better playing the stock market on your own, but most would get burned lacking the experience and skills needed. So I relunctantly say if you can jump into a 401k especially if the company you work for is throwing free money at you. You would have to be a fool, or completely full or rum, to miss out on an opportunity to cash in those company dollars.
So pass the rum to me and start investing for your future. Nicole well done and nice pic!
Leigh- great question. I am still learning the answers myself. I have not rolled over my 401k from Macy’s into my current employer’s plan just yet. I am still considering my options. From what I understand you can roll over your old 401k into your new employer’s plan at the discretion of your new employer’s policies. Not all employers offer a rollover option. If that’s the case, your best bet is to do a direct rollover into an IRA. By doing a direct rollover you can avoid a 20% withholding tax. This way you will not have to pay any tax penalties or lose any of your money.
You may also want to keep a close eye on our weekly Money Files. Harriet Johnson Brackey recently talked about rollovers, you can read it here:
http://www.pbs.org/nbr/site/onair/transcripts/070919g/
I also found this website very helpful:
http://www.smartmoney.com/retirement/401k/index.cfm?story=rollover
Thanks for your comment!
I think that's great, Nicole! I do the same thing. My dad urged me to get an IRA account while I was in high school. I have to admit, putting money in it seems impossible on a reporter's salary, but it's worth it. Also, I think it would be silly for anyone our age not to take advantage of a 401k.
By the way, I love your blog, Nicole. You spice up NBR.
you are not only beautiful, but smart. the secret to becoming a millionaire is saving 20% of your income each week, and becoming vested in a company pension plan. my company plan has paid me over a quarter million dollars since i retired and i plan to live long enough to collect another quarter million dollars. as you know you are one of my most favorite people in the world and i love you.
Interesting entry! Was wondering how those things transfer around from job to job. As in, did your 401k from Macy's transfer over to your new job? I'm around the same age and I think I might be more inclined to take advantage of a 401k if I knew I could tote it around with me from job to job. Cheers - thanks for the advice. With our social security system I'm gonna need it!
I am impressed that you have chosen your own path and taken advantage of that free money. if i were you I would try to put in every bit of money your employer matches. now while you are young, because when you have a family and children it will be harder to save and everything you put in now will have compound interest later on.