Too Young to Think About Retirement? Think Again!

“That’s when I realized the growth potential that retirement savings provided,” he says. “I calculated on my intern salary that if I contributed that same amount each year and continued to get $700 every three years, I had the potential to earn $7,000 in interest in 30 years.”

Saving for retirement became his first priority when he joined Caterpillar—the world’s largest manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines—full time in 2006 as an electrical engineer. The 28-year-old has come a long way since saving $3,000. Working for just five years, Davis has more than $70,000 in his 401(k).

His strategy: Davis invests 10% of his monthly paycheck, or $674, and his company matches 6%, or $405. He currently holds 30% in company stock and 50% in an aggressive mutual fund in his 401(k). “I know this is overexposure to company stock and high-risk mutual funds, but I prefer a riskier portfolio while I am young and plan to slowly reduce my exposure to risky holdings as I get older.”

Outside of his 401(k) he also invests in a Roth IRA, which currently holds $11,584. He and his wife also run their own website design company, AQUE Consulting, and contribute revenues from the business to their IRAs and other investments, having added $3,000 so far this year.

“I opened a Roth after I started investing in my 401(k) because it’s important to look at other forms of investing for retirement, and the Roth allows me more flexibility in my investing options.”

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