Better Later Than Too Late

Reading Time: 5 minutes    

This post is also featured on The Mastermind Within!


Do you sometimes think to yourselves I should have started saving for retirement earlier? Do you think you started too late? Or do you think you should have put more money into your retirement fund(s) at an earlier age when you may not have had other obligations like a mortgage or a family?


If you’re still really young and don’t have those thoughts, great, continue to plow away money. If you do and have answered yes, don’t sweat it because you can’t change the past. But you can continue to plan for the future and maybe even take steps to make up for lost time.



Started Saving, But Just Barely


At the age of 20-21, I started saving for retirement. But it was hardly anything. You could almost say I just had an account at work and was contributing maybe $50 a pay period or something. Naively I thought to myself why should I save for something so far away. What if I die next year or something? I had purchased a brand new Honda Accord Coupe (black on black with leather interior) at that time, was going out with my friends almost every weekend, buying new clothes every year, and taking little mini-vacations for no reason.


I thought since I was saving I was fine but didn’t have any rationale for how I determined how much I should save.


Many people out there think the same way. Consequently, many people don’t have enough to live the lifestyle they want and have to continue to work.  But working as we become older should become more of a choice rather than a necessity. And in order to make it a choice, necessary changes needed to be made in my life.



Later A Spark Went Off


Several years later I was working for a financial services company. Because of my work responsibilities, the position forced me to learn more about investing (e.g., stocks, fixed income products, mutual funds, fees, trading, etc.). So then I took a bit of a leap or rather a hop and opened up an account with an online broker.


I soon learned that commission was cheaper with a different broker and switched over – important lesson learned quickly. The point being, it was another way of saving and using the proceeds to save more (e.g., dividends and reinvestment). By the way, now I don’t pay any commission in my after-tax account.


During my time working for this Fortune 500 financial services company, my retirement contributions were increasing, but I still could have done better. I didn’t realize the potential of compounding. This was back in 2011 when the 401k plan limit was $16,500 per year. For 26 pay periods, I would have had to contribute about $635.


And at the time, I was contributing about half of that or a bit over $300 per pay period. I missed out on the opportunity to invest $300 more per pay period or about $8,250. From 2011 to the projection at the end of 2017 is an average rate of 13%:


Better Later Than Too Late simple money man


Source: YCharts


So the $8,250 difference alone could have earned me over $1,100 in returns. Now that I am more aware of the power of the markets, I know what I stand to benefit in the long-term.



Finally, The Contribution Light-Bulb Turned On


About three years ago, I came to the realization that I should put as much as I can towards retirement. For this, I have the Personal Finance community to thank and will forever be thankful. In the next year or so, I plan to contribute the max to my retirement (I’m almost there).


Along with this, my wife (whose account I manage anyway because she doesn’t like dealing with it) 🙂  is contributing a respectable amount to her retirement plan as well – of course taking advantage in full of the matching contribution.



Ignite Your Spark And Turn On Your Light Bulb Now Not Later


If you’re trying to catch-up, here are some small steps that can yield big results.


  1. If and when you get a raise, pretend you didn’t and take the extra to increase your contribution.
  2. If and when you get a tax return, pretend you didn’t and take the extra to increase your contribution.
  3. If and when you sell things around the house, pretend you didn’t and take the extra to up your contribution.
  4. If you have a side-job and are earning some extra income, pretend you’re volunteering instead and channel those funds into an IRA and get the benefit of no tax when you withdrawal at the time of retirement.
  5. For hourly employees, if and when you get overtime pay, pretend you didn’t and take the extra to increase your contribution.
  6. If you ever receive an inheritance, pretend you didn’t and increase your contribution.
  7. If you receive a settlement, take as much of those funds after you pay lawyers, and other bills to increase your contribution.
  8. If you’re still trying to catch-up and have maxed out your 401k ($18,000 or $24,000 for employees 50 or over) and IRA ($5,500 or $6,500 for employees 50 or over), just remember that you can always contribute after-tax dollars to your brokerage account and purchase one or many low-cost index funds.


I’ve personally taken 6 out of 8 of the above steps.


Ofcourse while doing many or all of these things to drive up your contributions, continue to make sure you are getting a good deal on your investments e.g. low fees and proven performance.


Finally, some may argue that if you have more cash and less invested you could be in a better position from a risk of loss via a possibly inflated market. Experts believe a recession can come soon and in turn, this can hurt 401k balances. Peter Schiff from Euro Pacific Capital believes a recession can come “as early as next year.”


Although I personally don’t believe in timing the market, I also don’t believe in diving in completely head first either with loads of cash just to be invested in the market.




So what age did you start contributing to your retirement? Are you taking any steps to catch-up for lost time? Are there any windfalls of cash people can use that I may have missed?


I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!