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Subject:  Start Early / Choose Foolishly Date:  1/28/2004  11:21 AM
Author:  Bankman007 Number:  38785 of 88520

I spent some time reviewing my wife's and my 401K statments from prior employers and was struck by some intellectual lightning and I'd like to share it with the foolish.

My statement had a year end balance of 32K and my wife's is 26K. But thats not really important.

What's important is this: I started 13 years ago, often putting 15% of my income into the 401K. I estimate that I put a total of $27,100 of my hard earned pretax cash into this account. I invested in a mix of company stock (FBF), Dodge & Cox balanced, Putnams New Op's Fund and some others. On occasion, I re-allocated some of the balance. Indexes were not an option.

On the otherhand my wife waited til we met (about 6 1/2 years ago) and I convinced her to get started towards retirement. She saved 15% for about 3 years. I estimate she contributed $14,000 of her hard earned cash. Then she quit working to raise our children. My wife invested simply in Vanguard's Extended Market Account. And never touched it.

So after saving almost twice as much(27K vs 14K) and for far longer my retirement account balance is in the same range as hers. No doubt, if I let it go another 5 years, the improved returns and lower costs from her account would put our balances on par or worse.

Now we'll get to the lightning part: Starting early and often is only part of the equation. YOU MUST MAKE GOOD INVESTMENT CHOICES. And even when you think you've made good ones you better review periodically against a benchmark. In this case the benchmark was my wife's account but the S&P 500 is as good as any.

I'm glad I caught this now and not 20 years down the road. I'm still undecided as to whether I will buy stocks or put the money in a Vanguard Index but what is clear is that I must roll over the money into an IRA. And I must do it soon.

You see the time horizon is important but the rate of return is the true equalizer.

Hope you can learn from this experience.


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