The Difference One Percent More Could Make

One percent. That's just a penny out of a dollar. It doesn’t seem like much, but it can make a huge difference in how much you end up saving for retirement. Check out the difference a percent or two can make over time: 

Assumptions: $40,000 starting salary with 2 percent salary increase each year, earning a 6 percent average annual return in a tax-deferred account.*

*Rate of return is for illustration only. Your returns will vary. Taxes will be due at ordinary income tax rates upon withdrawal at retirement. Premature withdrawals may be subject to a 10 percent tax penalty.

Playing Catch-Up

If you’re a bit behind on your retirement savings, here are some ways to find more money to put aside. Just be sure to earmark any savings toward your retirement plan accounts:

  • Snatch the match. Does your employer-sponsored retirement plan offer a matching contribution? If so, check to see if you’re contributing enough to qualify for the full matching amount. For example, if your employer matches 50 percent of your contribution up to 6 percent of salary, adjust your contribution amount, if necessary, to at least 6 percent. Otherwise, you’re throwing away money.

  • Keep the car. If your current vehicle is still in good running condition, hold off on buying a new one. estimates that a new car depreciates about 9 percent the minute you drive off the dealer’s lot. Plus, a new car generally costs more in insurance premiums. Even if you can hold off for only a year, that's a year’s worth of car payments you could save for retirement instead.

  • Dodge device envy. Hold on to your cellphone or tablet for as long as possible instead of chasing the latest new gadget. For example, instead of paying $26 a month for 2 years for a new phone, put that money into your retirement account.

  • Run refinance numbers. If you have a vehicle, home mortgage or student loans, look into the possibility of refinancing at a lower rate to save money. Also explore consolidating credit card debt onto a low-interest-rate card.

  • Stash extra cash. Earmark any extra cash—bonuses, tax refunds, gifts, insurance settlements, paid-off loans—toward retirement savings.

Annual Reviews and Year-End Planning

Plan to review your progress at least annually and make adjustments as needed. A quick year-end check could help you stay on track toward meeting your goals.

Set or revise savings goals.

Review your progress toward goals using benchmarks by age.

Start or continue to add to an emergency savings account.

Review your retirement plan contribution rate and increase by at least one percent if possible.

Open and contribute to an IRA in addition to your employer-sponsored retirement plan.

Review asset allocation and diversification, and rebalance or reallocate if necessary.

Review and update beneficiaries, if necessary.

Find out about retirement savings in previous employer plans and arrange to roll over to your current plan or IRA, if applicable.

Organize tax records.

Consider making an appointment with a financial advisor.

Create a will and other estate planning documents.


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