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Chapter 20. And Now It's Time to Retire > Getting Ready - Pg. 195

And Now It's Time to Retire 195 If you have 10 years or more before you retire, you still have time to stash away some cash. But you'll need to stash away a lot. Just do the math, and then stick to your plan--you'll need to change your lifestyle so that you'll be able to save more. But what if you don't have 10 years or more? Stop wringing your hands: It's not hopeless. You could consider retiring later so that you would have the time to stash away the cash. And remember, you won't need all the money in your retirement account the day you retire. That money may have many years to continue to grow and compound tax-deferred before you begin to withdraw it. So, we offer some rules for catching up. Maximize Your 401(k) Contributions If you're married, be sure your spouse is also maximizing. A married couple making $50,000 each may be able to contribute as much as $21,000 annually, pre-tax. If their employers match up to 6 percent, that may add another $6,000 annually to the family nest egg. If you do this for 10 years and earn a 9 percent average return on your investments, you could have an additional $410,000 in your nest egg at retirement. Not bad! Let's take it one step further. Don't begin to withdraw this money until you reach age 70½, when the IRS says you must start your withdrawals. In the time between when you retire at age 65 and when you must begin tapping that fund, your $410,000 will have the potential to grow to more than $650,000. Impressive, huh? During those 10 years, you and your spouse made some sacrifices so that you could contribute the maximum to your 401(k), but here you can see the payoff. You contribute $210,000 (before taxes) over those 10 years, and your payoff is well over half a million dollars to spend in retirement. As we say, plan now, play later.