Your first paycheck has come and gone. So have your second, third, and perhaps even your 23rd. If you've been drawing a regular paycheck for any amount of time, I hope you've been socking away a good chunk of it for your retirement. Otherwise, I've got some bad news for you: You're late!

History suggests that you need to save about 15% of your paycheck -- every paycheck -- during your entire career in order to have a decent shot at retiring well. Say you started working Jan. 1, 1956, and continued employment through Dec. 31, 2000 -- a 45-year career. If, during that time, you ...

  • Earned the median household income
  • Socked away 15% of it at the end of each year
  • Received around a 10% annual return (near the market's average)
  • Were able to defer or pay any investing taxes out of another pocket

... then your retirement nest egg would have looked something like this:


Median Income

Savings (15%)

Compounded at 10% Annually

Cumulative Compounding































Historical income data from U.S. Census Bureau.

With a 4% inflation-adjusted withdrawal rate from your savings, your nest egg would have been projected to generate $40,167.22 in 2001. When combined with the average 2001 Social Security check of $11,077.32, that would have provided you with an income around $51,244.54. That's remarkably close to the median income from that year ($51,407) -- enough for a comfortable, middle-class retirement in much of the country.

It all adds up
Notice something special about the "compounded annually" column. In spite of the first contribution being the smallest dollar amount, it's actually worth the most when it's time to retire. That's the wealth-building power of compounding over time. It means that to have a decent shot at retiring well, you need every dollar working on your behalf -- and for as long as possible.

Sure, you can catch up if you started slow, but it gets expensive. At a 10% annual rate of return, to reach a cool $1 million in investments with only 10 years to go, you'd better be prepared to sock away around $62,745 a year. Contrast that with the $717 from your first working year and the $7,610 or so in your last working year from a strategy that spans your entire career. The sooner you begin, the easier it is to finish on top. So if you've received even one paycheck but haven't been actively funding your retirement, you're already late.

Get the help you deserve
Fortunately, you may not be on your own. Check with your employer and see if it offers a 401(k), 403(b), profit-sharing, pension, or other retirement plan. If it does, you'll certainly get Uncle Sam's help through tax-deferred contributions, tax-deferred growth, or even tax-free growth. You may even get your boss' help funding your retirement, through either a matching contribution or a straight-out contribution to your account. The catch? You have to fill out the paperwork, and you'll certainly have to contribute your own cash to get any matching benefits.

Here are just a few companies willing to help fund their employee's retirement accounts:



Hewlett-Packard (NYSE:HPQ)

$1-for-$1 match up to 6% of pay


$1-for-$1 match up to 4% of pay, $0.50-for-$1 match, next 2%

Biogen Idec (NASDAQ:BIIB)

$2-for-$1 match up to 3% of pay

If you work for one of these, or any other company that helps fund your retirement account, and you're not taking advantage of their generosity, then you're leaving free money on the table.

The siren song
Of course, there is another option when trying to make up for lost time. You certainly could try to beat the market with your investments. But remember that while some of the greatest investors of all time successfully trounced the market for decades, it certainly isn't easy to do. If it were, we'd all already be rich. Over the past decade, you would have seen a total return of about 115% by investing in the SPDRs (AMEX:SPY), an exchange-traded fund that tracks the S&P 500 index. On the other hand, had your quest to outperform led you to these well-known companies, the past decade wouldn't have earned you the same results:


10-Year Return

Coca-Cola (NYSE:KO)


Advanced Micro Devices (NYSE:AMD)


Tribune (NYSE:TRB)


Many people buying those companies 10 years ago were doing so in the hopes of outperforming the market. Though the stocks made them money, each trailed the index. That's a lot of lost time and a lot of missing potential returns. Since time is the most powerful asset you've got when it comes to saving for retirement, think twice about squandering any more of it chasing returns that may never materialize.

Get moving
So, what are you waiting for? Your retirement is getting closer and your nest egg needs your help now if you want it to be able to take care of you later. Haven't you already lost enough time as it is? Your retirement is too important for you to put off even one minute longer.

If you're looking for guidance on how to get yourself in gear quickly, then you're in luck. Take the next 30 days to try Motley Fool Rule Your Retirement for free. It might just give you the kick-start you need to secure your own prosperous future. Click here to start a free 30-day trial.

At the time of publication, Fool contributor Chuck Saletta did not own shares in any company mentioned in this article. Coke is a Motley Fool Inside Value recommendation. The Fool has a disclosure policy.