For Mark Roberts’ Use: When you were first hired on at your company, you were probably asked by human resources to fill out a number of forms. One of these forms pertained to your retirement plan contributions. You chose to automatically set up a contribution to your retirement account, based on a percentage of your income. Perhaps your company offers matching funds, or maybe it does not. But you expected that your income would grow gradually through the years, so that percentage should keep you saving for retirement at a steady pace, right?
Congratulations on making a smart choice for your future. Setting up automatic contributions is one of the easiest, and best ways to build your retirement fund. But what if there were additional ways to set aside a bit more money, that would compound over the years and result in a significantly larger nest egg? Would you be interested?
Consider the following hypothetical example*:
Megan and Jennifer are hired on at Company Y, both at a starting salary of $50,000 annually. Both women sign up for automatic contributions to their retirement accounts, at 6% of their salaries. Both workers earn a 3% salary increase each year.
Megan sticks with her original 6% contribution rate, whereas Jennifer increases her contributions by 1% each year until she is contributing 15% of her salary to her retirement fund.
What’s the difference? At the end of a thirty year career, Megan has accumulated $351,760 in her retirement fund. Meanwhile, Jennifer has amassed more than twice that amount. Her retirement account now holds $757,502.
The lesson: What seems like a small, incremental change in your savings account can amount to a significant difference in your final results. For more information on this, or any other retirement planning strategy, give us a call. We can analyze your situation as well as your goals, and help you make a plan for success.
*Hypothetical example assumes a 6 percent rate of return, and does not include taxes, fees, or expenses. We use this example to illustrate the power of compounding interest only, and actual results will vary.