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Reasons You Should Participate

Tax-Deferred Growth Money saved in your retirement plan grows tax-deferred. You do not pay taxes on the money in your retirement account until you begin to use it as your income or withdraw cash. Your savings stays invested and may earn interest for you, equaling faster growth.

Your interest earns interest.

Think of it as a “snowball” effect. As a snowball rolls downhill, it accumulates quickly and gets bigger. Your 401(k) account can work similar to this concept. The longer your money sits in your account, the faster it can earn interest and grow more quickly.

Dollar Cost Averaging By definition, dollar cost averaging is buying a fixed dollar amount of an investment on a regular schedule, regardless of the price. More shares are purchased when prices are low and fewer shares are bought when prices are high. Dollar cost averaging lessens the risk of investing a large amount in a single investment at the wrong time. You decide on the amount you want deducted from your paycheck and contributed to your retirement account. This enables you to invest a fixed amount of money over a fixed period of time. Here’s an example: You contribute $50 per week. While the amount of $50 does not change from week to week, the price of the funds you invest in will. The lower the price of the shares at the time you contribute, the more you buy.

Start Saving Early It’s never too late to begin saving for retirement, but it is proven that the earlier you start, the easier it is.

$516,126

$300,815

Tom and Jennifer start planning for retirement at age 25. Each contribute $212 per month and earn 4.2% average tax-deferred annual return. Their savings would grow to $516,126 by the time they reach 65.

However, if they wait until the age of 35, contribute the same amount per month at the same rate of return, they would only accumulate $300,815.

Starting 10 years earlier made a $200,000 difference!

For more information, visit americantrustretirement.com and click Financial Calculators under Quick Links.