Possible Benefits of Increasing Contributions

We all wish we could invest the maximum amount possible and enter retirement with more money than we know what to do with. Then, for most of us, reality sets in and we go with what we can afford.

Even if you can't contribute the max, consider increasing your contribution a little each year to potentially move closer to your retirement goals. Even small increases can help. Remember though, investing involves market risk, including possible loss of the money invested.

The need to save more

Don't cut yourself short when deciding how much you'll need to invest for retirement. Consider your goals and factors that may affect how far your money will go.

  • Lifestyle – Consider how you want to live in retirement. Will you be content with gardening and an occasional weekend trip or are you looking forward to a condo on the beach and golf several times a week. Whatever lifestyle you choose will have an impact on how much you need to invest now.
  • Inflation – The United States has experienced average inflation every year, except two, since 1955. Chances are good that things will cost more in the future.1
  • Healthcare – Healthcare costs now account for more than 20 percent of all personal spending, double what they were in 1970.2
  • Longevity – Whether you're 20, 40 or 60 years old, living past 100 is becoming more and more common.

A little goes a long way

Increasing your contribution each year, even a little, can help you reach your retirement goals. You might be surprised at the difference even a small increase can make.

Look at this chart for an idea of how even small deferrals can potentially add up. The chart shows hypothetical account values at retirement based on an investor's current age and deferral amount.

 
Growth Period Ending Balance
Deferral Per Pay Paycheck Impact Annual Pay Reduction Accumulation 10 Years Accumulation 20 Years Accumulation 30 Years
$25 $18.75 $488 $9,304 $27,605 $63,607
$50 $37.50 $975 $18,607 $55,210 $127,214
$75 $56.25 $1,463 $27,911 $82,815 $190,821
$100 $75.00 $1,950 $37,214 $110,420 $254,428
$125 $93.75 $2,438 $46,518 $138,025 $318,035
$150 $112.50 $2,925 $55,821 $165,631 $381,642
$175 $131.25 $3,413 $65,125 $193,236 $445,249
$200 $150.00 $3,900 $74,429 $220,841 $508,856
$225 $168.75 $4,388 $83,732 $248,446 $572,463
$250 $187.50 $4,875 $93,036 $276,051 $636,070
$275 $206.25 $5,363 $102,339 $303,656 $699,676
$300 $225.00 $5,850 $111,643 $331,261 $763,283
$350 $262.50 $6,825 $130,250 $386,471 $890,497
$400 $300.00 $7,800 $148,857 $441,681 $1,017,711
$450 $337.50 $8,775 $167,464 $496,892 $1,144,925
$500 $375.00 $9,750 $186,071 $552,102 $1,272,139
$550 $412.50 $10,725 $204,678 $607,312 $1,399,353
$600 $450.00 $11,700 $223,286 $662,522 $1,526,567
$634 $475.50 $12,363 $235,938 $700,065 $1,613,072

Chart assumptions: Bi-weekly deferrals, 25% tax rate for paycheck impact, 7% annual rate of return. This hypothetical illustration is not intended to predict or project investment results. It does not assume taxes, fees or account withdrawals during accumulation; if it did, results would be lower. This chart is not intended to project the performance of your deferred compensation account. Investments involve risk including possible loss of principal. Actual investment results will vary depending on your investments and market experience. Income stream durations and amounts are not guaranteed.

Ready to save a little more? Contact your Retirement Specialist today to increase your contribution.

Get the help you need

Talk with one of our Retirement Specialists for more information about planning for your retirement.


2 The National Retirement Risk Index, Center for Retirement Research at Boston College, February 2008

NRW-2907AO.2
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