I dare you to increase your retirement contributions by 1%.
Go ahead, I double-dog dare you!
For 20 years I have been hearing reports of how “pensions are rapidly becoming a thing of the past“. I don’t know what their definition of “rapidly” is, but everyone has been aptly warned by now!
It is no longer your employer’s job to make sure you save for retirement and the dismal failure that has become our Social Security system offers no promises of riches in our old age.
So what is the answer?
- Privatize a portion of Social Security contributions so we can actually save a legitimate sum of money?
- Pass a Federal law that makes people save?
- Transform our country into a socialistic society where the Government pays for everything (they would love that, wouldn’t they)?
The answer is to increase the amount you put into qualified retirement accounts by 1% a year. This is the perfect time to do it as many companies are offering open enrollment in their benefit plans right now.
A measly 1%?
You won’t miss it. It’s only a tenth of a tenth. If you make $50,000 a year then you would be increasing your contributions by $41.66 a month. That’s about $1.38 a day. Certainly you can do that!
Let’s play a guessing game
What will 3% of a $50,000 income saved in a retirement account averaging 10% from age 30 to age 65 turn into?
Answer: Over $425,000.
This example is completely unrealistic. Why? We didn’t adjust for future raises or company matches.
What that 1% can do for you
Increase your puny 3% contribution to 4% the 2nd year. Now we are at about $560,000, and all we had to do was start saving another 1% of our income.
Increase it by another 1% at age 32 and you will only be saving $2,500 (that’s less than $100 a paycheck) but would have $674,695 at full retirement.
You work too hard to retire broke
If all you do is save $100 a paycheck then you could realistically become a millionaire by the time you hit age 70.
Remember, our examples are based on a $50,000 income with no match and no raises. You work too hard to retire broke. Start saving for retirement today and push yourself to save 1% more than you would feel comfortable doing.
Your future self will thank you.