Age You Start Saving More in your 401(k)
|Contribute 2% more of pay (or $100 per month)||Contribute 4% more of pay (or $200 per mo.)||Contribute 6% more of pay (or $300 per month)|
*Assumes $60,000 annual eligible pay and 7% annual return
Sometimes employees can get discouraged when they see what it takes to fund retirement, especially if they’ve started saving late. It’s important to keep in mind that even “saving just a little more” can have a significant impact on the amount you can accumulate.
This Table shows how just saving an extra $3.33 a day (see the 1st column with the assumptions as noted) can have a significant impact on the amount you can accumulate over time starting at various ages. The other two columns demonstrate what saving an extra $6.66 a day or an extra $10 a day can accomplish.
Some employees question how this could be so. The answer lies in the process known as “compounding.” Compounding occurs when your investments earn growth on top of the growth that they generate. Albert Einstein called compounding “the most powerful force in the universe.” A former colleague of mine quipped about compounding, “Those that understand it earn it; those who don’t pay it in debt repayments.” (which some call the “bankers’ secret”-compounding of debt repayments). So it pays to stay on the “right side of compounding.”
So when you’re tempted to buy something you really don’t need, think of this Table to remind that saving “just a little bit more” for retirement can have a profound effect on your financial future.
The key is to get started today and use the tools you have available in your 401k to fund the future you so richly deserve.