The Power of Saving 1% More for Retirement
When it comes to financial security in retirement, the little things can sometimes make a noticeable difference. For example, raising your retirement savings by 1%, could have an impact on your future lifestyle. No matter if you put money in a 401(k), 403(b), or IRA, that small boost could grow over time. This may help you have a more comfortable retirement.
The Magic of Small Steps
Even though 1% might seem small now, it has the potential to grow into a much bigger retirement fund over 20 or 30 years. The earlier you start, the more time your money can grow. These benefits apply no matter your age or how far away retirement feels.
Let's look at some hypothetical examples.
This information is intended to be educational and is not tailored to the investment needs of any specific investor.
Approximations based on a 1% increase in contribution rate. Continued employment from current age to retirement age, 67. We assume you are exactly your current age (in whole number of years) and will retire on your birthday at your retirement age.
Number of years of savings equals retirement age minus current age.
Nominal investment growth rate is assumed to be 7%. Hypothetical nominal salary growth rate is assumed to be 4% (2.5% inflation + 1.5% real salary growth rate).
All accumulated retirement savings amounts are shown in future (nominal) dollars. This assumes no loans or withdrawals are taken throughout the current age to retirement age.
Your own plan account may earn more or less than this example and income taxes will be due when you withdraw from your account. Investing in this manner does not ensure a profit or guarantee against a loss in declining markets.
Finding the Extra 1%
Increasing your contributions doesn’t have to mean major sacrifices. Small lifestyle changes may help you save that extra 1%.
Bring lunch from home a few days a week. Use coupons or cut some nonessential expenses. Plus, since 401(k) contributions generally come out before you see your paycheck, you may not notice a change in your take-home pay.
If boosting your contributions all at once isn’t feasible, consider setting up an automatic increase each year. Many retirement plans allow you to schedule gradual bumps—perhaps timed with an annual raise—so you may not feel the pinch.
Aim for 15%
Some financial advisors suggest aiming to save around 15% of your annual income for retirement, including any employer contributions. Not there yet?
Don’t stress— the key is to contribute as much as you can now and work toward increasing it over time. If your employer offers a matching contribution, consider contributing enough to get that free money.
No 401(k)? No Problem
If your employer doesn’t offer a 401(k), or if you’re self-employed, an IRA is another savings tool. In 2024 and 2025, people can put in up to $7,000 each year. If you are 50 or older, you can generally contribute $8,000 to a traditional or Roth IRA.
Track Your Progress
Wondering how your retirement savings stack up? A simple check from your financial advisor may help you see where you are. They may also be able to suggest ways to improve your financial future.
Start Today
Even a small increase in savings—like 1%, 3%, or 5%— may make a difference when you retire. The earlier you start, the better you could potentially be when you retire.
Sources:
https://www.fidelity.com/viewpoints/retirement/save-more
Disclosures:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
