Take Advantage Of a 401(k)
“Back when we lived paycheck to paycheck with four kids at home, I wish we had put as little as $20 per pay period into a 401(k) or 403(b) (for educators),” said Pam Davis, a former speech pathologist at schools in the Omaha school system. “We thought we needed hundreds each month to save for retirement, and since that wasn’t an option, we had years where we put nothing into our accounts.” Once their children moved out, the couple tried to catch up with their savings, but it turned out more difficult than they expected. Sadly, they never succeeded in achieving their goal.
The good thing was that Davis worked in a field that provided a pension. “I had no choice but to give a set amount to the retirement account and my employer matched it at 101%. At the time, I didn’t even think about it, but now realize how wonderful that was. In fact, with little money in the 401(k) and 403(b) accounts, it is our lifesaver,” she said.
Your Action Plan
You don’t have to live in poverty to benefit from an employer-sponsored retirement program. The amount that you contribute from your salary is up to you to decide. You can start by making small contributions and increase them gradually, as you start earning more.
It’s of particular relevance to capitalize on employer matching. A simple calculation will show you that you can easily double your savings. For example, if you earn $30,000 annually or $2,500 a month and contribute 5% of your paycheck to your 401(k), you save $125 a month. With 5% matching contributions from your employer, you reach $250 per month. In a year, instead of putting away $1,500 a year in your retirement fund, you’ll put aside $3,000. Much better, isn’t it?
