Benjamin Franklin said “Money makes Money. And the money that money makes, makes money.” Benjamin Franklin knew the importance of saving money, and that there is no greater surety of wealth than the compounding of interest on one’s money. However, today 53% of Americans do not have access to or fail to contribute to a company sponsored 401K plan. In the United States, 17% of the workforce have not even given thought towards contributing to a retirement plan. Half of all Americans over the age of 55 do not have a savings plan set aside for their retirement. In the United States, 45% of workers who have failed to start contributing towards a retirement account by age 55 plan on working many more years to generate an income source, instead of retiring (Carosa, 2016).

A reason many people give for failing to contribute to a retirement account is competing financial responsibilities and priorities. In a company sponsored 401K plan, each dollar that an employee contributes towards a retirement plan is tax-free. Each dollar that an individual spends on a competing financial priority is subject to federal income tax. For example, if an individual earns between $37,651 and $91,150 then each dollar spent on a competing financial priority and not in a 401K plan has been diminished by 25%, or the applicable tax rate for a single filing taxpayer. Thus, the money that could have been saved and could begin to compound interest has already been diminished by 25% on the competing financial responsibility. In 2016, an individual with access to a company sponsored 401K plan can contribute up to $18,000 tax-free. An individual over the age of 50 can contribute an additional $6,000 tax-free.

Please keep in mind, and pass along these five tips for saving.

  1. Start saving for retirement as early as possible.
  2. Any contribution to a savings account is better than no contribution at all.
  3. Don’t waste money on frivolous items, when you can save the money.
  4. Invest for the long haul. Contribute towards retirement with the idea that you cannot have access to the money until you retire.
  5. Over time, the compounding of interest on small amounts of savings can build to a large sum of money.

“Those who understand compound interest are destined to collect it. Those who don’t are doomed to pay it.” – Albert Einstein

Carosa, C. (2016). Why retirement savers love 401(k)s. Benefits Selling, 14(2), 38-38. Retrieved from