As a Millennial myself, I know that there is one aspect of life that we are always thinking about, and that is the present; the now, the YOLO, and the ‘if I have cash lets blow it now’ mentality because why not? I’ll just figure it out later. Well this may be all fun and games, but there is something you can do. Something that will allow you to feel justified about spending money freely like this, and that is setting yourself up little-by-little for the future.
As a kid, whenever I received any amount of money, whether it was an allowance or a paycheck, my dad made sure that I always put a portion away in savings for the future. At the time, this seemed like a cruel punishment, but he wanted to ensure that I would have money set aside for college when the time came. Upon receival, I was always inclined to blow this money on candy, electronics or the latest trends, but I am really glad that I did choose to save. When I was finally ready to go to college, I had a large lump sum saved in a separate bank account that was allocated to help me avoid copious student loans.
This same concept can be applied to your 401k. If you are able to put small amounts of money away, you can retire comfortably, with 40ish years to really live your retirement out to the fullest. Many companies in corporate America offer 401k plans that can even MATCH your contribution by up to 4-6%. In the long run, this is HUGE! This means that whatever money you put into your account, up to 4-6% of your salary, your employer could match about half or all of that amount. This means that you could have the potential to double the amount you ultimately save in the early stages and create a snowball effect of interest and returns.
So let’s do some more math here.
According to my 401k Calculator:
Say you are currently making $40,000 per year, and your salary is expected to grow 3% every year (inflation, promotions, job changes),then if you are putting 10% away every year ($4,000: Year 1), after 40 years you will have amassed an amount close to $2,100,000. Much of this money will be relegated pre-tax, meaning you will have more money available to put away that doesn’t have to go to taxes. The best part of this deal is that with this example, almost $410,000 of this amount will be FREE MONEY, money you get from a good Rate of Return (RoR) and/or employer contributions. So everyone, please take my advice and ask your company or current employer about the 401k plans they offer. Please take advantage of these! Your future family and self will thank you. I promise.
Thanks to BankRate.com the screenshots can be found below.