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Start Now, Not Later

Geoff Langenberg,

June 08, 2016

Retiring Your Way, Managing Your Money


When planning for retirement, the phrase “start now, not later” are words to live by. Having time on your side is a very powerful retirement planning tool. Unfortunately, time is something that we can never get back.

The “ideal” amount to comfortably live off of during retirement can vary depending on who you ask, and is completely unique to everyone’s financial status. You can still accumulate a healthy account balance by simply contributing to your company’s 401(k) plan sooner than later. The sooner you start saving the more likely you’ll reach your goal. A traditional 401(k) contribution is pre-tax, which, in-turn, lowers your taxable income. This means you will receive a higher tax refund (or pay in less). Money in your 401(k) grows tax-deferred, which helps your annual return on investment.

The power of putting time on your side is pretty simple. For example, If Kellee and Geoff both make $40,000 per year and both contribute 5% to their retirement plan, but Kellee has been investing for 42 years and Geoff has been investing for 32 years, Kellee’s account balance comes out to $351,901 and Geoff’s balance comes out to $181,780 (assuming an annual 6% rate of return). By investing 10 years longer than Geoff, Kellee comes out over $170,000 ahead on her investment!

Studies show that nearly 60% of 401(k) plans automatically enroll participants at 3% of compensation (Kiplinger’s May 2016). If you can afford to increase your contributions periodically, you will increase your chance of hitting your goal. For example, if someone is 30 years old and sticks with the automatic 3%, that person will have roughly $367,000 when they get to retirement age (this is assuming a 3% annual raise and 7% rate of return). But if the participant increases their contribution to 10%, their balance will be just over $1 million!

Many companies offer a matching contribution as an incentive to enroll in the 401(k) plan. Take advantage of this free money! If a company were to offer a 50% match up to 6% and you apply it to the example above, the participant will have roughly $1.6 million by the time they are 65.

Union Bank & Trust offers a variety of Retirement Calculators to help you gauge whether or not you are on track to hit your retirement goals or if you need to increase your contributions.

Saving the proper retirement amount may seem unattainable at times. But with a proper plan, putting time on your side, and living by the phrase “start now, not later,” you will be on your way to a achieving you retirement goals in no time.

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This blog article is for informational purposes only, and is not an advertisement for a product or service. The accuracy and completeness is not guaranteed and does not constitute legal or tax advice. Please consult with your own tax, legal, and financial advisors.