Most of us know it is smart to save money for those big-ticket items we really want to buy — a new television or car or home. Yet you may not realize that probably the most expensive thing you will ever buy in your lifetime is retirement.
Perhaps you’ve never thought of “buying” retirement. Yet that is exactly what you do when you contribute to a 401(k) plan. You are paying today for retirement income tomorrow. When you consider that income may need to last 10, 20, even 30 years, it’s easy to understand why retirement is not cheap.
Given the cost of retirement, saving for it can seem futile — especially when you can’t afford to contribute much to a 401(k) plan today. However, two finance principles — compound interest and dollar cost averaging — can make retirement more affordable than you think.