Barto's Basics

I wasn’t out of college yet when my stepdad coached me up on a very important “if I were you” scenario… “If I were you, when you get your first job that offers a 401k, auto deduct 10% before you every get your first paycheck. This way, you’ll never miss the money and be tempted not to save it”.

That was super useful! And I headed that advice.

Now, I like to keep it real and I will share this truth with you. I did exactly what my stepdad told me to do, until the 2007/2008 mortgage meltdown happened and I needed every penny of my paycheck in my hands. I had voluntarily left my company in July 2007 when a leader tipped me off to what was coming in the industry and I respectfully jumped ship before what certainly would have been a layoff…

From July 2007 – April 2009, I was working 3 jobs and at one point I had a 4th. I look back now at my 2008 taxes and shake my head knowing most weeks I was working 60 hours and I barely made $40,000 that year. There was no money to invest in that timeframe. I was tapped. I was in survival mode.

BUT- in April 2009 I went back to the mortgage world and guess what I did with my first paycheck? 10% to the 401k right off the top. I was committed to getting myself back on track.

Over a 10 year period, with ups and downs in the market, my money grew quite a bit.

Here is a breakdown of what 30 + years of contributing to your 401k can look like:

Contribution: 10% of pretax salary per year ($60,000 with 2% annual salary increase)

Average annual rate of return: 8%

Start Age: 25

Retirement Age: 60

Total Contribution: $299,967

401k Balance at age 60: $1,348,000.

This amount can be higher if you work for a company that matches 401k contributions…

It’s worth mentioning that my 401k is managed through Fidelity and I’m in it for the long haul (I don’t need this money for a long time) so my money is invested in conservative stocks – I’m not playing the short-term aggressive stock game.

Even with no contributions since June 2019 and with a crazy market in 2022, that money is still working to my advantage.

My strategy here is really “set it and forget it”.

You do not need to be a financial expert to invest in your 401k – you just need to do it.

For easy to use financial calculators, visit http://www.dinkytown.com

And for the record – I am not a financial advisor/CPA/CFP etc. I recommend you find yourself someone who can help you plan and guide you on your way to financial freedom and comfortable retirement 🙂