When Should I Invest in My 401(k) Retirement Plan?

Laura Adams, MBA,
November 4, 2011


Autumn asks:

I've been working at my company for almost 4 years and am debating whether to start contributing to the 401(k). They offer matching up to 5% of my salary. I'm only a part time employee and making a retirement contribution would reduce my income by $100 a month or so. Should I start contributing now at age 33, or wait until I become a full time employee at some point in the future? 

The answer to this question is to absolutely, positively get started investing for retirement RIGHT NOW!

Having access to a 401(k) plan with matching funds as a part time employee is a fantastic benefit that many people would love to have. So don't take it for granted.

The road to hell, and a cushy retirement, is paved with good intentions. When you make excuses like:

  • I'll get started investing and make up for lost time when I go full time,
  • I'll start putting money aside as soon as I get a raise, or
  • I'll make a new budget that includes investing in January,

you're burning valuable time. Did you know that TIME is the real secret to building wealth?

Here's what I mean:

If you start investing just $100 a month when you're 25 years old, you'll have over $350,000 to spend in retirement.

But if you wait until you're 35 to invest that same amount, you'll only end up with $150,000.

And if you don't get started until you're 45, you'll have just $60,000.

When you have employer matching on top of your own contributions, you can build wealth at a much more impressive rate.

Let's say you make $25,000 a year and your employer matches 50% of your contributions, up to 5% of your salary each year. That means if you contribute $100 a month or $1,200 a year of your own money, your employer will kick in $50 or $600 ($1,200 x 50%) a year for you. You're now investing a grand total of $150 per month or $1,800 per year.

With employer matching, you can turbo-charge your investment results.

Take a look at how powerful having an extra $50 in matching funds from your employer can be to your retirement nest egg:

If you start investing $150 ($100 of your own money plus $50 in matching) a month when you're 25 years old, you'll have over $525,000 to spend in retirement--versus $350,00 with no employer matching.

If you wait until age 35, you'll have $225,000--versus $150,000 with no employer matching.

And if you wait until you're 45, you'll have less than $90,000--versus $60,000 with no employer matching.

My examples assume an 8% average annual rate of return. They also assume that you never increase your contributions. As you earn more income, you should be able to invest more than $100 per month, making your retirement portfolio mushroom in value!


To learn more about investing, be sure to join my upcoming free Webinar E-Class, "5 Things You Should Do With Your Money Now!"

Find out more about the free class details and register for the webinar at SmartMovestoGrowRich.com. I look forward to having you in the webinar--but if you can't attend live, the replay recording will be made available to everyone who is registered.


Laura Adams is the award-winning author of Money Girl’s Smart Moves to Grow Rich. Get the paperback or ebook on Amazon.com!

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401k Nest Egg photo from Shutterstock