What Matters Most
Building a larger 401(k) balance.
I'm looking at a spreadsheet sent to me by Tom Kmak, who runs a company called Fiduciary Benchmarks that serves 401(k) plan sponsors. The spreadsheet gives the case of a hypothetical 42-year-old employee who makes $40,000 per year, is growing her salary at 3% annually, has no current 401(k) balance, and has started to contribute 6% annually with a 50% employee match. Her company's 401(k) plan carries funds with an average annual expense ratio of 0.72%. (There are no additional plan costs). Those funds will gain 7% per year before expenses. She will retire at age 67.