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Early Start Early End

Fred Wallace

ELEVEN YEARS AGO, at age 56, I lost my job as a mid-level manager at a Fortune 500 company. I had joined the organization at age 28 with no savings. Twenty-eight years later, I was able to retire at a relatively young age with a pension and a seven-figure 401(k).

During those 28 years, I was passed over several times for promotion to vice president. Instead, I settled into my director-level position, never earning a salary of more than $150,000, plus bonus. Yes, that would be a handsome sum in most parts of the country, but it isn’t in high-cost Los Angeles, where I live.

While I didn’t have as successful a career as I’d hoped, I was—from my first day with the company in March 1982—a firm believer in saving for retirement. I don’t recall receiving any words of wisdom about the importance of starting early on retirement savings. Yes, I had an MBA. But there were no classes on personal finance at the University of California, Los Angeles, when I got my business degree. But the 401(k) came with a company matching contribution, and something told me that this was a no-brainer and that I should capture the full amount of the match.

That proved to be a great decision. As many have written, the power of compounding is one of the “financial wonders of the world.”

Knowing I had my whole career in front of me, and confident I’d always be able to find work with an MBA from UCLA, I invested my portfolio 100% in stocks. Every year, I contributed the maximum to the 401(k) to reduce my annual taxes. I also made no portfolio changes during either the 2000-02 dot-com bust or the 2008-09 market upheaval. Instead, I stuck with my bimonthly payroll deductions.

I also lived below my means and never paid any interest to a credit card company, always paying off all credit cards in full each month. Admittedly, I didn’t marry until age 41. After marrying, my wife and I had a daughter, making me a joyful dad at age 46. Delaying marriage and not starting a family until my 40s undoubtedly made it far easier to save large sums during my initial working years—a powerful addition to my portfolio’s compounding.

Fast forward to 2011. My daughter was now age 10. I had survived two rounds of downsizing, but lost my position on the third go-around. I was 56. The good news: My 401(k) was worth $1.5 million and my pension was valued at $600,000. Here I was, a millionaire at age 56, thanks to saving from day one and despite never rising above mid-level management.

I received a severance package from my former employer. I set out to look for other work—but without any luck. It seemed my age weighed heavily against me. After a year of looking and after crunching the numbers, I decided to retire, turning my attention to part-time work for a nonprofit.

Regrets? Zero. How has my retirement gone? My family has traveled annually to places far and wide away from our home base in Los Angeles. The value of my 401(k), now rolled into an IRA, is worth more today than it was in 2011, even after this year’s stock market swoon.

The secret: starting early, passive investing and never attempting to time the market. What if I hadn’t started saving aggressively at age 28? This story probably wouldn’t have a happy ending—because I’m not sure how I would have coped with my 2011 layoff and my inability to find another job.

Fred Wallace is retired following a career in marketing and sales. He has been a do-it-yourself investor for most of his life and currently serves in a volunteer leadership role for the American Association of Individual Investors. Fred enjoys golf, skiing, and traveling with his wife and daughter.

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