According to an article I read this week, Millennials Are Freaking Over Retirement—And Not Doing Much About It by Ben Steverman, young workers say saving for retirement is more stressful to them than paying off debt or their job security. However, the article went on to say that most young workers are not participating in their employers’ 401(k) plans or utilizing other means of saving for retirement.

The reasons for not saving for retirement vary but, for many people, the biggest reason is they don’t think they can afford it. Let’s look at an example. Say you start your working life at age 25 and you earn $25,000 per year your first year. Your employer offers a 401(k) plan where if you put in 6% ($1,500) of your salary, they will put in 4% ($1,000), for a total investment of 10% of your salary or $2,500. Here’s what will happen if you choose to invest 6% of your salary in the 401(k) plan:

  • $1,500 will be deducted from your salary and put in the 401(k) plan.
  • Your employer will put $1,000 into your 401(k) account.
  • Your federal taxes will be reduced by $225 (using 2015 tax rates).
  • You will have $2,500 in your retirement account even though your net investment was just $1,275 ($1,500 less the $225 tax savings).
  • In other words, the $1,275 you could have had for spending money right now turned into $2,500! That’s a 96% return!

Another common reason for not saving for retirement is the misconception that a small amount like $1,500 won’t make that much of a difference. Continuing on with the example, let’s make the following assumptions:

  • Your employer gives you only a 3% raise each year.
  • You continue to invest 6% of your salary into the 401(k) plan.
  • Your employer continues to put 4% of your salary into your 401(k) account.
  • Your 401(k) account earns 6% per year.
  • You retire at age 65.

What will happen?

  • Through the course of your working life, $196,658.24 will have been invested in your 401(k) account – $117,994.95 from your salary and $78,663.30 from your employer.
  • When you retire at age 65, you will have $628,580.16 in your account!

And it all started with $1,500.

If you would like to have us look at your individual situation, contact us at [email protected] or 402-502-0250.


Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.

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