We had a frosty beverage with an old friend recently that we had not seen since before I stopped working 4 years ago. He was astounded that I had retired early and asked if we had made any lucrative investments to make it happen.
I told him that our investment strategy had been pretty vanilla – simple index funds in our 401ks and after-tax brokerage account. Like many people he seemed surprised and confessed he struggled to put just the minimum in his own 401K to get his employer’s match. He has a nice house on a lake and nice toys in his life, but he never prioritized his retirement savings.
I find that people are always looking for ‘secret’ investment advice even though their 401k is right in front of them. I read recently that the average worker puts about $6.9K in their 401K each year. That’s just 36% of the $19K limit. Employees over 50 can contribute an additional $6K ‘catch up’ contribution.
If you think about it, the great majority of people, a 401K and Social Security may be all they need. Putting as much as you can in your 401K – even with a modest starting salary – would yield the average person a sizable nest egg. It did for us. Especially when you add in the typical employers match.
In the future, when people ask me about their finances, the first question I will ask will be “Are you maxing our your 401K?” If not, then I’ll say “don’t by the sports car or boat”.
We maxed out our 401K accounts from day 1 of working back in 1989. I was amazed at how fast they grew. Personal finance doesn’t need to be difficult does it?
How diligent were/are you in maxing contributions to your 401k?
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