For Mark Roberts’ Use: Back when you first started working for your current employer, you filled out a number of forms regarding taxes, insurance, and your retirement fund. Most likely, you established an automatic contribution to your retirement account. You chose a certain percentage of your paycheck to divert to savings, signed the form, and checked that item off of your to-do list.
But have you made any changes to your contribution plan over the years? Setting up automatic contributions is a smart choice, because it’s one of the easiest ways to prepare for the future. But if you haven’t re-evaluated that decision in recent years, you could be missing out on a big opportunity to grow a healthier nest egg.
The following example illustrates what we’re talking about (but keep in mind these are just hypothetical scenarios):
Mark and John are hired at Company X, both at a starting salary of $50,000 per year. They both opt for automatic contributions to their retirement accounts, and decide upon a savings rate of 6 percent of their salaries. Each worker will earn a 3 percent salary increase each year.
Mark sticks with the original 6 percent contribution amount for the duration of his career. Meanwhile, John revisits that decision each year, increasing his contribution by one percent annually until he’s contributing 15 percent of his salary to his retirement fund.
What’s the difference at the end of their careers? After 30 years at Company X, and assuming they otherwise made the same decisions and earned the same compounding interest rates, Mark has accumulated $351,760 in his retirement fund. But John has managed to save more than double that amount, and can now retire with $757,502 in his retirement fund.
Wow! Yes, John managed to save more than twice Mark’s final amount, but the most exciting thing about this hypothetical scenario is the ease at which he accomplished this goal. By simply increasing his contributions by a tiny amount, John will be able to enjoy a much more generous retirement income. He likely didn’t even notice these small changes each year, but he’s certainly happy about it now!
Remember, sometimes responsible retirement planning involves only very small changes over a long period of time. We can help you analyze your budget, identify these opportunities, and take full advantage of them. Give us a call, and we’ll discuss your retirement goals in more detail. Then, together, we’ll make a plan to help you gradually and comfortably accomplish those goals.
