Search

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
$654 $490.50 $12,753 $243,381 $722,149 $1,663,958
$711 $565.00 $14,690 $267,416 $805,421 $1,887,812

This table shows the cumulative value of 26 biweekly deferral amounts over 10, 20, and 30 years, assuming a compound annual rate of 7% and a 25% federal tax rate, for a single person with an annual salary of $38,000 and one deduction for federal tax purposes. Actual investment returns will vary from year to year, and the value of your account after the specified periods of years shown in the table may be less or more than the amounts shown. This illustration is hypothetical and is not intended to serve as a projection of the investment results of any specific investment. If fees and expenses were reflected, the returns would have been less.

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.3
NRW-2907AO.3
Modal Dialog Start Close

You are going to a page that is not part of this website

We make no endorsement of its content or guarantee of its accuracy. If the Continue button does not work, the page may have been moved or removed.

Please consider logging out of your account before you proceed.

NRW-2913AO.1
Modal Dialog End