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401(k) contributions: a must for investors in their 20s and 30s

Posted by Cheryl Costa  September 27, 2008 10:28 AM

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"I don't even have one K, let alone 401 Ks" said 23 year old Zack Teibloom in a recent New York Times article.

I had to laugh when I read that quote but what wasn't so funny was the rest of the article that said that only 49 percent of eligible workers in their 20s participate in the 401(k) plans offered by their employers. Less than half! That is pretty discouraging, especially when you consider that most employer's plans provide some form of matching. That means that many workers in their 20s are turning down totally free money.

This is an incredible shame because, as a financial adviser, I know that the people who are well on their way to a secure and fulfilling retirement are almost always the people who started saving even a small percentage of their income as soon as they started their first professional position. It is amazing what saving even 5 or 10 percent of your income can amount to if you start when you are 22. We are talking about four to five DECADES of compounding growth. People who don't start early and wait until they are in their late 30s and early 40s can usually never catch up. The amount they need to save is just too great.

And now is an incredible time to start saving for retirement. When we see a market downturn like we are seeing today, everything you buy is at a reduced price.

My advice to young investors:

Absolutely sign up for your employers 401(k) plan as soon as you are able.

Contribute as much as your budget will allow, ideally enough to capture the full employer match.

You will be saving for 40 years, so a high allocation to equity mutual funds is appropriate.

Whatever you do, don't cash out your balances when you change jobs. Forty percent of workers in their 20s do and that is a huge mistake even when it doesn't seem like a lot of money is involved.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

About the contributors

D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of, a credit card and gift card marketplace, and, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

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