The key to creating wealth through your retirement plan is to start early, contribute regularly, invest in a diversified mix of assets and stay the course – even when the stock market experiences temporary downturns.

Starting early is critically important. The example of three planparticipants, Mike, Karen and Steve, will show you just how important an early start can be.

A Tale of Three Participants Mike joined his company’s plan as soon as he was eligible at age 24. Hesaw how some of his relatives struggled to make ends meet after they retired and did not want that to happen to him. Right from the beginning,Mike contributed $125 every month to his plan.

Karen postponed joining the plan until she was 29 years old because she had student loans she wanted to pay off first. Once she eliminated thatdebt, she decided she would contribute $125 every month to the plan.

Steve always found one more excuse for why he could not afford to participate in the plan.

First, it was that new fishing boat he desperately wanted, and then it was that long fishing trip to Canada he planned to take with his buddies.

Finally, he understood that he had to start taking responsibility for his own future financial security and joined his company’s plan when he was 33 years old. Like Mike and Karen, Steve contributed $125 every month tohis plan.

All three participants contributed to a tax-deferred retirement plan earning an average 9 percent annual fixed rate of return on their investments (compounded monthly) and stayed in their plans until they reached age 62. Take a look at their results:

Number of YearsTotal Value ContributedTotalof Account at to PlanContributedAge 62

Mike38$57,000$486,363 ($125 for 456 months at 9 percent) Karen33$49,500$304,618 ($125 for 396 months at 9 percent)

Steve29$43,500$207,788 ($125 for 345 months at 9 percent)

These investments results and the characters are for illustrative purposes only. Actual returns cannot be predicted and will vary. Ordinaryincome taxes will be due on accumulated amounts when distributed.

Mike has the largest retirement account total – $181,745 more than Karen’s and $278,575 more than Steve’s. Mike benefited greatly fromstarting early and allowing his money to compound for five years longer than Karen and nine years longer than Steve.

The Lesson The lesson is clear: Jump on the opportunity to participate in your company’s retirement plan and make regular contributions to it. Thesooner you join, the longer you can put time to work on your behalf.

(Alan S. Moore is a financial advisor of Legg Mason Wood Walker, Inc., adiversified securities brokerage and financial services firm that is a member of the New York Stock Exchange, Inc. and SIPC.)

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Copyright © 1999, Wick Communications, Inc.

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