I had a conversation a few months ago with my Mom about a trip we took 14 years ago. I asked, “Ma, when we went to the Philippines and you decided to pull your 401K out so we can visit and help out the family, did you ever build those savings back?” “No Son, why?” she asked. “Well didn’t you take out over 6k? Why didn’t you build it back up?” ” Well a bunch of stuff happened Son and I just didn’t get a chance to build it back up.” There it is… stuff just happens.
Life just happens and before you know it, almost 15 years has passed by and there is nothing to show for it. I love my Mother very much. I appreciate all the sacrifice that she had to take to get me to where I am today. The problem is, her kind heart can be taken advantaged of; and her lack of planning for the future has really made her later years more difficult than it should be. Now lets that a look at some hypothetical numbers if my Mom built that money back up, and kept going for the last 14 years.
2002: Removed 10k from 401K
Total penalties: $3400
Received: $6400
Annual addition: $ 2000
Years to grow: 14 years
Average rate of return: 7%
Overall total: $74,043.39
That’s over $64,000 that my Mom lost from the last 14 years! Additionally the $3400 penalty taken out creeps the number even closer to $70,000. The power of compound interest is just mind-blowing. It really is a crime to mess with time. Just like there’s no replacement for displacement. I haven’t shown my Mom the breakdown of how much money she would have today if we just didn’t take that trip home yet. I’m sure that she would agree with me that 2 month trip was just not worth it.
Let’s break it down: We got hit by a typhoon, I broke out into hives, and I sprained my ankle within the first month of being home. With better planning and saving methods, I think we would have been able to do it the year after and probably would have had a better time too. All is not lost though. I opened a Vanguard retirement fund for her last year. Her money has already tripled and I am so proud to be able to help her build future income. It’s never too late to invest in your future, whether your 20 or 50.
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