Even if retirement feels very far away and you're busy living your life right now - it's important to think about your future self. Bills, rent, vacations and everything in between tend to take priority right now. But your future self is counting on you, and starting your 401(k) early is one of the best things you can start doing right now. Let's look closer at what benefits you can get from starting early with 401(k). | A 401(k) is a powerful retirement savings tool that helps lower your taxes today while building money for later. Compounding and consistent contributions are doing an amazing job here. So why wait? The sooner you start, the longer your money has to grow. |  | One of the best things of a 401(k) is compounding. It's when your money earns returns, and then those returns also start earning returns. Over time, this snowball effect can be incredibly powerful and can significantly boost your savings. At first, the growth can feel slow and maybe even a little boring. But over time it can snowball into something impressive. That's why starting early matters so much. | Let's picture an example: a 25-year-old puts away $6,000 a year and continues to do so until age 65, earning an average annual return of 7%. Not exactly thrilling day to day, but year after year those gains keep stacking up. After 40 years, compounding has quietly done most of the heavy lifting, turning steady contributions into a serious retirement cushion to roughly $1,011,000. | You can't count only on Social Security alone because it isn't enough to cover all time of retirement, unless your dream retirement includes a very tight budget and a lot of coupon clipping. | The good news is that contributing to a 401(k) is about as easy as saving gets. You pick a percentage of your paycheck, and the money is automatically invested before you even see it. Even small contributions can grow into meaningful savings, especially when you give them enough time. |  | You have a choice between 2 two different types of 401(k) accounts, and some employers offer both options. They both do the same job of helping you save for retirement, but they handle taxes differently. | With a traditional 401(k), the money comes out of your paycheck before the government takes taxes out. So if you make $50,000 a year and put $5,000 into your traditional 401(k), you only pay taxes on $45,000 right now. That's nice because it lowers your tax bill today. But here's the catch: when you retire and start taking that money out, you'll have to pay taxes on it then. | If we look at a Roth 401(k), you pay taxes on your full paycheck first, and then the money goes into your 401(k). So using that same example, you'd pay taxes on the full $50,000, which means no tax break today. But when you retire, every penny you take out is completely tax-free. | So which one should you pick? Well, it really depends on your situation. If you're making good money now and think you'll be in a lower tax bracket when you retire, the traditional might make more sense because you're saving on taxes when they're higher. But if you're younger or in a lower tax bracket now, the Roth can be great because you're locking in that lower tax rate and getting tax-free money later. | Your 401(k)'s growth depends on how much you contribute, how your investments perform, and how long you let the money stay invested. Many employers also offer matching contributions. | Of course, there are annual contribution limits. For 2026, you can contribute up to $24,500, with extra catch-up contributions available if you're over 50, and even higher limits for certain ages. The total combined limit, including employer contributions, is $72,000. You don't have to hit those numbers to benefit, though. Even starting small is still far better than not starting at all, and it gets you moving in the right direction. | A comfortable retirement requires planning. A 401(k) is only part of your entire retirement plan, but an important one. Even small, regular contributions can add up significantly over the years, putting you on a solid path to a secure and comfortable retirement. So why not start right now? Your future self will thank you. |
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