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Chapter 4. Your Best Chance at Retiremen... > Individual Responsibility - Pg. 42

Your Best Chance at Retirement Is Your 401(k) 42 Warning! Americans are among the world's worst savers. We save about 6 percent of our annual pay, while most others in the industrialized world save 10 to 15 percent or more. People in countries like Japan who don't have a Social Security system must save more, but we're still not saving our fair share. Experts estimate that boomers are saving about one third of what they really need to retire. Hope you're not an "undersaver." At age 30, they reverse roles. (No, George doesn't become a woman and Maria a man.) Maria stops saving and George starts to save $2,500 a year. They continue this strategy for the next 35 years, with each earning an 8 percent annual return on their money. Our question for you: Who has more money at age 65? George or Maria? You would think it's George. After all, he saved over three times what Maria did--$87,500 versus $25,000. But Maria's ahead at age 65. She has over $114,000 more than George does, even though she saved $62,500 less. How did this happen, you ask? The power of compounding. The single biggest secret to building wealth is understanding how to use the power of compounding . The Power of Compounding