Retirement the best laid plans. First, they tell you to go to school and get good grades. You won’t be able to get into college they say. Little do they know that there are many colleges willing to accept you because bottom-line is they want your money. So you get into college, you graduate, and get a job. Now you have to plan your exit strategy. Sounds daunting because it is.

Expert advice. All the experts say you have to start saving and investing early. Pretty much from the time you start your first job. They might as well say as soon as you can start walking and talking because it takes a while before your investments are self-sustaining from what is known as compound interest, which is interest calculated on the principal and also on the accumulated interest that grows money over time. In other words, if you invest $5 dollars and $1 dollar of interest grows on it, then interest will now start accruing on $6 dollars and so on. That’s how you build wealth. This happens even faster when you get out of debt because then you have more money to invest.

Most commonly known and used retirement plans

401k. This is a retirement plan where participants make a contribution from his or her paycheck that is usually done through pretax and/or post-tax deductions. Investments are chosen among the options provided under the plan. Pre-tax deductions grow tax deferred and are tax deductible.

IRA’s. Roth vs. traditional

A Traditional IRA is a retirement account that allows participants to direct pretax income into investments that grow tax deferred until the money is withdrawn.

A Roth Ira is similar to a traditional IRA, but contributions are from after-tax income, are not tax deductible but distributions are tax free.

I remember being in my twenties and finally landing a job that had a 401k. I thought it would never happen. Little did I know I now needed to manage paying the bills, picking investments, eating, bathing, juggling work and school on top of becoming a semi-professional financial expert to manage it. I just decided to do enough to get the match.

This was a time when I was not making a lot of money mind you. Less than $30k thank you very much but something is always better than nothing. So I had to work with what I got. My other coworkers laughed at me for contributing so little (we all made peanuts) and some even decided not to invest at all!

I ignored the naysayers. I continued to invest until I was laid off during the financial crisis. Since, I did not know much about 401k’s and rollovers at the time I left it alone and let it sit. It turned into about $5,500.

Later, I was informed that it went below the $5k mark needed for it to stay invested and I would have to cash it out. I learned that if your investments fall below this amount that it cannot stay with your old employer’s plan. However, to cash out any retirement plan before the age of 59 ½ means paying steep penalties such as 10% for early withdrawal and paying federal and state income tax. I was like no way!

I just held fast and waited to see what would happen. The only way that I was cashing in my golden ticket was if the tax man himself came to my house, tipped his hat, flipped over with his cane and said I have no choice or Uncle Sam, aka the government, would take my money away from me. Well, guess what, that never happened.

My investments ending up going up and down for a while teetering between $5k and $5500 but eventually settling down to the tune of over $8k. Not bad for someone who was laughed at and told that I did not make enough to invest.

I would go on to rollover that account and invest modestly over the next few years and that balance within 3 years became over $15k! I’m glad I stuck to my guns and decided to trust my gut instead of listening to others. Your instincts are usually the best advice you can take.

And after seeing what was endless possibilities thanks to compound interest I said to myself…this is just the beginning.