Friday, January 7, 2011

Slow and Steady Saving Still Pays -

Update to Jan 09Image via WikipediaBy TOM LAURICELL

The path toward having enough money to enjoy a comfortable retirement is a long one. And as the recent decade in the U.S. stock market shows, it's one where patience pays off.

For younger retirement savers who diligently put money away, that long march of time also provides a crucial ally: the ability to recover from inevitable losses. That's especially the case for 401(k) investors who don't pass up the essentially free money that comes by taking full advantage of any matching contributions provided by their employers.

There's no reason to sugar-coat the miserable experience most stock investors have had since the collapse of the technology-stock bubble beginning in March 2000. The Standard & Poor's 500-stock index, the most commonly used market barometer, has risen an average of just 1.4% per year over the past 10 years, a 3.6% gain once dividends are included.

It was only last month that the Dow Jones Industrial Average pushed above where it stood in mid-September 2008 when giant brokerage house Lehman Brothers collapsed.

But let's look at how steady savings and the passage of time can benefit younger 401(k) investors. Consider a person making $40,000 per year in 2000 who contributed 6% of her salary -- $200 per month -- in the first year with a company match of 3%, or $100 to start.

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