A while back I posed a question about saving for retirement. When I first started managing my money, I decided not to contribute anything towards my 401(k) because my employer automatically contributes 3% regardless if I do or not. I decided it would be better to pay my interest-earning loans first.
However, since paying off those two loans, I only have interest-free debt to my parents left. I want to pay this off ASAP, but I also need to get in the practice of saving for retirement and the sooner I do this, the better. I crunched the numbers using this handy retirement calculator and just by starting this year as opposed to next, I will save myself over $200,000. Of course, there are so many factors that play into this (rate of return, types of investments, salary increase), but there’s no doubt that the earlier you invest, the better.
Here’s the new plan:
Contribute 5% of my income now (equals 8% with employer match), and when I finish paying off my debt (Summer 2010?) I will raise that goal to 15% or the max $5000 per year. I just contacted my HR rep to make this happen. It won’t be processed until June and will be approximately $115 of taxed dollars, so I will need to switch around my budget a bit. Assuming the market starts to turn upward (and I’m pretty hopeful), that should secure a comfortable and possibly early retirement.
How much do you save for retirement per year?