This came home to me a few years ago when I calculated how much I had missed out on by not taking advantage of my 401(k) as soon as I started working. Most immigrants who come to the US feel that they have so many other priorities before they can think about retirement. What most people do not realize is that they can start with a small contribution, which will make a big difference in the end. Numbers do not lie so here is an example
401(k) Contribution Schedule (2011) Fund 401(k) for 15 years Annual Income of $ 12,000.00- increasing 3% per year Beginning Balance= $ .0 Contribute 3% of Salary -Invested Monthly Your Employer will match 100% up to 3% of salary - Annually Annual Interest Rate = 5% - Compounded Annually | |||||
Year # | Beginning Balance | You Contribute | Employer Contributes | Earnings | Ending Balance |
1 | .0 | 360.00 | 360.00 | 8.18 | 728.18 |
2 | 728.18 | 370.80 | 370.80 | 44.83 | 1,514.61 |
3 | 1,514.61 | 381.92 | 381.92 | 84.41 | 2,362.86 |
4 | 2,362.86 | 393.38 | 393.38 | 127.08 | 3,276.70 |
5 | 3,276.70 | 405.18 | 405.18 | 173.04 | 4,260.11 |
6 | 4,260.11 | 417.34 | 417.34 | 222.49 | 5,317.27 |
7 | 5,317.27 | 429.86 | 429.86 | 275.63 | 6,452.62 |
8 | 6,452.62 | 442.75 | 442.75 | 332.69 | 7,670.82 |
9 | 7,670.82 | 456.04 | 456.04 | 393.90 | 8,976.79 |
10 | 8,976.79 | 469.72 | 469.72 | 459.51 | 10,375.73 |
11 | 10,375.73 | 483.81 | 483.81 | 529.78 | 11,873.13 |
12 | 11,873.13 | 498.32 | 498.32 | 604.98 | 13,474.76 |
13 | 13,474.76 | 513.27 | 513.27 | 685.40 | 15,186.70 |
14 | 15,186.70 | 528.67 | 528.67 | 771.34 | 17,015.39 |
15 | 17,015.39 | 544.53 | 544.53 | 863.14 | 18,967.59 |
Totals | $6,695.61 | $6,695.61 | $5,576.37 | ||
Source:www.MyCalculators.com
If I made a minimum wage of $6 an hour and started contributing 3% of my salary 15 years ago, the balance would be 18,967 with an average return of 5%. This would be with a total contribution of 6,695.61. The kicker is that the contribution is $15/bi-monthly with an increase of 3% per year.
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