My wife knows where my blog is. She seldom reads it because her interests are elsewhere. After I wrote 401k vs Pension: How To Make Your 401k Pay As Much As a Pension, I was pretty excited.
“Honey, I wrote a great article today.”
“Really? What was it about?”
“It was about how to make your 401k pay as much as a pension.”
“Silly. I tell you how to do it.”
“Okay … ”
“You put more money in it. You grow it faster. You give it more time. Then you will have a big 401k.”
There, she just intuitively described the future value formula:
FV = PV * (1 + i)n
It goes to show that most people understand what it takes to have a large 401k because it’s just common sense. We don’t need a class in high school for this.
Of the three factors, the investment return is up to the market conditions, somewhat out of our control. The other two factors are completely under our own control.
Contribute more and contribute early, you will have a large enough 401k to cover your retirement. Not rocket science.