I’ve had my mind on retirement planning lately.  Ok….really I just went to an RV show, but a few years living full-time in an RV is part of my retirement dream.  So it sort of counts.  But I did actually have a conversation last week with a young Penn State Law alumna who is starting her first full-time job post-graduation.  She asked me about whether she should start putting money in her 401(k) right away, or if she should work on paying down other debts first.  This question is one that a lot of people grapple with when they are first starting out.  And my advice is always the same:  as soon as you are eligible, contribute to your retirement plan at least as much as is required to receive any employer match.  My father gave me this advice when I started my first job, and I have never regretted following it.

One advantage of starting as soon as possible is that the money starts coming out of your paycheck before you get used to getting paid.  It’s impossible to miss money that you’ve never received.  The money comes out of your salary pre-tax, so it’s not as big a hit to your bottom line as you might think.  It’s just one more thing that disappears before you see it—income tax withholding, Social Security withholding, health insurance payments, retirement contributions—it’s all money that you’ve earned but you never receive.  So you don’t count on it and you don’t really think about it, because the process for you is passive.

It is important, however, to contribute enough to get any employer match.  Usually it is something like you contributing 7% of your income and your employer pitches in another 5%.  The percentages will vary, but the concept is the same.  If you give enough, your employer gives you more.  They actually pay you to participate in the retirement plan.  Just for investing in your own retirement.  If you don’t contribute enough to get the match, you are literally throwing away free money that you could have received.

But the most important reason to contribute early and consistently is the power of compounding interest.  The earlier you start saving for retirement, the longer your investments have to grow.  As an example of this, when I was in grad school in 1991 to 1993 (yep….I’m old) I had $150 per semester withheld from my assistantship funds and it went to the Ohio State Employees Retirement System.  I remember being really mad about it at the time.  Those were lean years, and that $600 would have made a big difference in my life at that point.  But I had no control, so there was nothing I could do about it.  After I started working full time, I rolled that $600 into an IRA.  I never added another penny to it. And due to the power of compounding interest, by the end of 2021 that $600 had grown into $8,600.  That’s more than 14 times the original investment.  And all I had to do was leave it alone for 30 years.  Now imagine how much growth would come from 12% of your starting salary, rather than just a few hundred dollars.  And keep increasing it as your salary grows.  Slow and steady wins the race when it comes to retirement savings.

It’s true, however, that the stock market has its ups and downs.  That $8,600 I had at the end of last year is currently only worth $7,300.  The stock market has not been in a great place recently.  But you should never let that deter you from putting money into your retirement fund.  I look at bear markets like I look at shopping the sales.  When the price is low, you get more for your money.  So right now my regular retirement investment is buying more shares than it was at the end of 2021.  My retirement investment is on sale!  Slow and steady.  The market will eventually turn around again, and the painfully large drop I have seen in my total account balance this year will bounce back, likely with a euphorically large gain (and so it will continue, up and down like a roller coaster for the rest of my life).

Even with the volatility in the stock market, because I’ve been consistent about contributing to my retirement fund over the last 30 years, I know that I’ll be able to retire comfortably to the RV of my dreams in only five to seven more years.  It seemed like an eternity away when I started my first job in financial aid in 1993.  But time has a way of passing more quickly than you expect it to.

When it’s time for you to select your benefits for that first big job, take my father’s advice and prioritize your retirement contributions.  You won’t regret it.