About your retirement accounts

The next time you and your colleagues are standing around the watercooler complaining about your boss, swapping tales about how you’re overworked and underpaid, trying to top one another with examples of how you’re being exploited, keep this one thought in mind: Your employer may be making you rich.

Got a 401(k) plan at the office? Is there employer matching? Are you contributing the maximum amount you’re allowed each month? Then all this should add up to a very comfortable retirement, one that you’d be hard-pressed to match if you were doing it all on your own and thus couldn’t benefit from the extraordinary tax breaks that come with one of these company-sponsored retirement plans. Take a look at Sidebar 3.4, which shows the growing power of just $100 a month in savings over the past 20 years if it had been invested in a typical 401(k) plan.

Taking into account the power of tax-free compounding and the typical 50 percent employer match, you would have $184,000 by now—more than you would have earned in a typical individual retirement account, and much more than you could have hoped to gain by investing that money with a 51 high-flying fund manager. That manager would have had to nearly double the performance of the stock market over those 20 years to do the same job your employer has just done for you.

So remember that the next time you see your boss walking by your cubicle and you find yourself fighting the urge to sound off. Of course, having a 401(k) plan at work is only half the battle.

Investing in it as aggressively as possible is just as important, and that’s often easier said than done. Too many things can put you behind schedule, especially early in your career, when you’re likely to move from job to job, each time moving up the corporate ladder perhaps, but never staying in any one place long enough to be vested in the company plan. Or perhaps the temptation of all that money sitting in a retirement account becomes a bit too much to resist when you change jobs and suddenly have access to it. It’s all too common for someone to cash out a 401(k), rather than rolling it over into an IRA or a new employer’s plan. “Young people aren’t as focused on retirement,” says Paul Yakoboski, then an analyst at the Employee Benefits Research Institute. “They see the cash and they think about paying bills, taking vacations before starting a new job, or buying a car.” And even when you do settle down, other things—like that down payment on a house or tuition bills for your kids—can drain off the money you know you should be setting aside for retirement.

So if you’re like a lot of people, you now find yourself in your mid- to late 40s or even older, realizing that you are nowhere near where you need to be with your retirement investing.

It’s panic time.

Don’t worry—it’s not as bad as you may think. Even if you get a late start, aggressive, intelligent investing can get you back on track within a few years. The key is that 401(k) plan. Our advice is simple: Max out. Put in as much as your employer allows you to each year.