How I Learned to Stop Worrying and Love My 401(k)

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Every one of us has had "aha! moments." Epiphanies. Days when we reach a crossroads and realize that we have to make some changes. For the next two months, we're sharing moments like those in our Life Stage Lessons series: Real stories straight from the financial lives of our DailyFinance contributors about times when they realized they were due for a serious course correction. So read on, learn from our mistakes, and get inspired to improve your relationship with your money.

Ever since I was a kid, I've been obsessed with saving money. I've also been partially obsessed with the fear that I won't have enough money in retirement to live comfortably, and will wind up eating dog food or living in a halfway house when I'm old. Maybe those ideas are extreme, but the fear that I won't have enough saved for retirement has certainly gotten me to contribute regularly to my 401(k), though that's something I wish I'd started a lot earlier and saved more robustly during my working life.

Maybe it was the convalescent hospitals I visited one summer to help my mom while she worked that made me a determined saver. After setting up an activity for the residents, I could walk around the convalescent home for a bit, seeing how frail and forgotten some of them were. They had the money to stay there, but it was a place I never wanted to live.

However my fear of not having enough money to live comfortably in old age came about, I only really started saving for retirement at about my third job out of college. That was when pensions were being eliminated by employers, and self-directed 401(k)s were being introduced as retirement savings vehicles.

I remember the financial services company representative giving us workers -- many of whom, like me, could barely afford an apartment in the bad part of town -- a speech about how we were now responsible for our retirement, and our employer would match the contributions we made. To me, that sounded like an automatic raise -- which was rare at this company -- though it was a raise I wouldn't see until I retired.

Powerful and Relatively Painless

Through automatic withdrawals from my paycheck, I saw the power of saving regularly and how my money compounded over time. It was an easy and relatively painless way to save because I didn't really notice the money going to my 401(k) because the money wasn't going into my checking account. You can't spend what you don't see.

It also helped reinforce an earlier lesson in how automatic withdrawals can be a painless way to save money for long-term goals.

I now contribute to a SEP IRA as a self-employed freelance writer, though not through automatic withdrawals, because my monthly income fluctuates. Instead, I set aside money from one client each month to put into the individual retirement account, and I send a check to my brokerage firm. There are months when I'm not as good as I should be about sending that check -- usually ones when I don't earn much from that client -- so I try to contribute the money I earn from any extra work to my retirement savings, too.

I don't know if I'll ever stop worrying completely about having enough money saved for retirement, but I'm glad that I realized early how important it is.
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