7 big money myths
I’m too young to worry about retirement
It’s tempting to prioritize paying off student loans and saving for a down payment on a house over contributing to a 401(k) — especially if retirement is decades away. But starting now gives you a huge financial advantage.
Consider this: Starting at age 35, an annual retirement savings contribution of $5,000 will result in a balance of $796,687 by age 70, assuming a 7% annual return, according to Fidelity Investments. If you made the same annual contribution starting at age 25, your account balance would top $1,641,122 in time for retirement.
"It’s the power of compound interest, and it’s an opportunity younger (investors) should take advantage of,” says Kevin O’Fee, vice president of defined contribution product management at Fidelity Investments.
While maxing out your 401(k) should be your long-term goal, O’Fee acknowledges that the 2013 contribution limits of $17,500 might be out of reach for younger investors.
"It’s OK to start small, just start," he advises.
Our 401(k) calculator can help get you started.