We’ve all heard the saying “Nothing in Life is Free.” But is that true when it comes to your company 401(k)? I think not.
The advice I’d give to the young adults of today is to start contributing to your company 401(k) as soon as you’re eligible to contribute and take full advantage of your employer’s matching contributions. Most companies will match a certain percentage of your contribution.
This is Free Money.
If you don’t take full advantage of your company’s matching program, you’re losing money! You did nothing but contribute to your retirement fund (which also lowers your taxable income) and your company gave you free money.
Who doesn’t want free money?
In addition to all the free money you’ll earn throughout your career, the earlier you start your 401(k), the more you can take advantage of compound interest.
What’s compound interest, you ask?
Compound interest is interest added to the principal of a deposit so that the added interest also earns interest from then on. So not only are you earning interest on your contributions, but interest on your interest!
The earlier you start funding your retirement, (even the minimum amount to maximize your employer’s matching contributions) the more you can make your money work for you.
Don’t think you can’t afford to contribute to your 401(k), think you can’t afford NOT to contribute to your 401(k).
This post was written by Matt Johnston, FTWCCU Indirect Loan Officer.