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Employee Benefits & Executive Compensation Blog

Providing insights, trends and updates on employee benefits and executive compensation.

Employee Benefits & Executive Compensation Blog
July 14, 2022

How Jill Beat Jack; The Wonders of Interest Compounding in a Tax-Free Retirement Plan

Jill plans long-range. She would like to have a large nest egg when she retires. Jill is 22 and elects to put $50 each paycheck (semi-monthly) into her employer’s 401(k) plan. Even if Jill stops saving at age 32, her retirement account will continue to grow, free of any tax.

Jack is 22 and prefers spending his money. He knows his retirement is a long way off, so he delays making contributions to the 401(k) plan. At age 32, Jack decides that it’s time to start saving $50 per paycheck, but now it’s ten years after Jill had started saving.