The earlier you start, the less you have to put in each month to get to where you want to be. The example I always use (and I'm sure you've heard it) is the one about two 21-year-olds. The first one puts in $2,000 per year from age 21 to 30, and then puts nothing more into the account until he retires at 65. The second person starts at age 30 and puts $2,000 into his account each year until he retires. Who has more? The first person, because of the compounding of interest.
Have your young employees start at the lowest possible contribution percentage they can—perhaps 1 percent. Then encourage them to increase that percentage by 1 percent each year, or to take a set amount of a bonus check and set it aside for the plan. If you can even get them to put $25 into the plan, it's still better than nothing. If your plan allows set dollar amounts, this is even more attractive than percentages because they can set the amount that's comfortable for them—without the initial shock of "Whoa! 2 percent of my pay?"
It always helps to match their contributions with an employer contribution.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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