The power of saving early: Meet Jake

When Jake landed his first job out of college at 22, retirement was the last thing on his mind. After all, why worry about something 40 years away? But one afternoon, a financial advisor visited his office for a lunch-and-learn session about 401(k) plans. The advisor shared a simple truth:

The earlier you start saving, the less you have to save overall to reach your goal.

Jake was intrigued, so he did a quick calculation. He made $36,000 a year and decided to put 6% of his salary, or $2,160 into his retirement that first year. For the rest of his career, he stuck to contributing 6% of his salary a year into his retirement fund.

Meanwhile, Jake’s coworker, Mark, brushed it off. He also made $36,000 a year coming out of college. “I’ll start later,” he said. Mark finally began saving at 35, but contributed double what Jake did, saving 12% a year to catch up.

Assuming that they received 3% salary bumps annually and earned 9% on their investments, who faired better?

Why did Jake earn a million more? Compounding.

Jake’s money had an extra 13 years to snowball, making all the difference.

Now in his 50s, Jake doesn’t stress about retirement. He’s still contributing, but the heavy lifting was done decades ago.

Mark, on the other hand, wishes he had listened at that lunch-and-learn.

The takeaway? Start now, even if it’s small. Future You will thank you.

Want to maximize your 401(k) and make smarter career decisions? Check out Becoming a 401(k) Millionaire for everything you need to know about building wealth for your future!