If Your Employer Doesn’t Offer This — Run Away
Jobs give us the ability to buy a lot of things like the latest gadgets and clothes, toys, vacations.
I guess they also help us pay for food and shelter, but meh, those aren’t that important.
At the end of the day, our jobs help us pay for a lot of short term needs and wants. But what about the long term?
I know I don’t want to be working for the rest of my life. I’d much rather be sitting in a log cabin in the woods overlooking mountains while drinking a warm cup of coffee and — sorry, got carried away daydreaming.
Anyway, if your job isn’t offering anything that helps you achieve retirement, I’d run away, fast.
401(k) has entered the chat.
Here’s the thing about 401(k) plans. They aren’t as “sexy” as all of those internet gurus claiming you can get rich in one year and retire before 30.
All you have to do is buy their $1000+ course full of content that they likely googled and compiled into a neat list.
There’s something that a 401(k) does offer though, that these gurus don’t.
Consistency and a proven track record.
If you were to choose a portfolio within your 401(k) that simply tracks the S&P 500, you would have made money during any 20-year period.
Now that’s looking pretty sexy to me.
The question you probably have at this point is “you know, that’s great and all, but how can this help me retire?”
Not only am I going to answer that, but stick around a little longer if you want to know how you can get there quicker
The first thing you need to figure out is how much you want available to you in retirement.
Let’s assume you’d like to withdraw $70,000 per year while in retirement. You would need roughly $1,200,000 million in your 401(k).
Curious how I got that number? Check out this article:
Now, because I’m a mind-reader, I already know what your next question is.
“How much would I have to save each month in order to have $1,200,000 by retirement?
Well, this is heavily dependent on how old you are currently and when you plan to retire. But for example’s sake, let’s assume the following
- You’re 30 years old and want to retire at 60.
- You have $0 saved in retirement accounts
- 7% return (10% ROI - 3% inflation)
You would need to save $977 per month.
You can do this calculation for yourself here
Now, as promised, here’s how you can supercharge this while using less of your own money with 401(k) matching
Most companies that offer a 401(k) plan will also match your contributions, usually up to a certain percentage of your salary.
There are several types of matching, but the most common are a dollar for dollar match, or partial match. For simplicity, I’ll go over a dollar for dollar match scenario.
In this example, we’ll go with someone that makes $70,000 per year and their company offers a 401(k) match up to 3% of their salary ($2100).
That means we’d have to save $2100 less per year to meet our goal of $1,200,000
So, instead of $977 per month, we would only have to save $802 per month, $175 less.
And this is why, if you’re employer isn’t offering a 401(k) match, run and go somewhere else that does!
