Umbrella Insurance

For a variety of reasons, people put off saving for retirement. It’s not uncommon for people to say, “I’m going to start contributing to my retirement after I…” If you’re saying this to yourself now, have you thought about how much money that can cost you in the future? Let’s take a look:

The maximum contribution for retirement accounts (457, 401(k), 403(b), etc.) is $23,000. Let’s assume that a person just got hired at 25 years old and is going to work a 30 year career making $23,000 in contributions their entire career. Assuming an 8% rate of return (which is on the conservative side), the employee would have almost $2.9 million in their retirement account. That’s a great retirement nest egg!

Now let’s say that the same person waited five years to start making contributions but everything else is the same. The employee would have $1.8 million in their retirement account. Although that’s not bad, those five years cost the employee $1.1 million! If the employee waited 10 years, they would only have $1.1 million in their account at retirement. Again, that is a significant amount of money, but it is almost $2 million less than what they could have had if they made contributions their entire career.

Most people don’t realize that waiting as little as five years to start making contributions can literally cost them millions of dollars in retirement. We all have different goals, responsibilities, and lifestyles, so it may not be possible for everyone to contribute $23,000 into a retirement account from day one. But now that you know how much even a few years can cost, you can decide for yourself if you should start making retirement contributions a priority.