<prompt> Human: I have always wondered this. Lets assume that I make 65,000 per year on salary. I put 6 into my 401k every month, and my company will match 6. From what I understand, 401k is calculated on the gross pay, so that would be 650 per month 325 individual and match. Lets assume that I am 25 years old and would retire at 65. Assuming that my contributions never change for any reason, I will have saved 312,000 into my 401k over the course of my career.How would one reasonably live for an additional 20 years on 312,000? I mean, it can be done, but it would really require a lifestyle change. Coming from a reasonably comfortable salary of 65,000, it would be a radical change of pace. Right now, many people simply rely on Social Security, but as a young person, I cannot simply assume that Social Security will continue to exist in infinitum.I understand that retirement plans are actually a form of investment, but I guess dont really know what kind of ROI would be expected.EDIT: I didnt expect so many answers so quickly. The obviously component I was missing was compound interest. I didnt realize that you were actually collecting on interest every single year which will then accrue additional interest the next year.EDIT 2: This post has nothing to do with how much I should invest into my 401k. This was all theoretical with easy numbers 5 would have been easier than 6, but I just picked a number. The salary, age, nor contributions are my own.Assistant: You are missing the power of compounding over long periods of time. With your numbers your 312,000 of contributions over 40 years would be worth 1.2M at 6 annual return.Human: Yes, this is exactly the stuff that I dont understand. I have never found any good explain it like Im 5 breakdowns. My expertise is in software engineering and not finance haha!I didnt realize that you actually had returns on your investments every year. I was under the impression that your 401k was kind of like a bond that vested after however many years and that was that.In turn I didnt realize you were gaining compound interest on your contributions. Compound interest is a very powerful thing, so I can absolutely see how its much more valuable than just putting that money into a savings account.  <response>: You wont automatically get compound interest in your 401k. You need to invest your 401k in something that has the potential for growth. So you should definitely look into what the options are within the 401k you are talking about. 