Retirement Savings: The Power of 1 Percent

Did you know that depositing just 1 percent more of your annual salary into your 401(k) or 403(b) plan can have a monumental effect on retirement savings goals? We demonstrate how beneficial this choice is with the example below.


John, age 40, earns $50,000 per year. He has been depositing 2 percent of his salary into his 401(k) plan for the past 12 months. If he makes no changes to his yearly contribution percentage over the next 25 years—and assuming that his investments earn a 4 percent annual rate of return—his account will have a balance of $55,975 when he turns 65.


Not bad. But could it be better?


Let’s say John automatically increases his contribution by 1 percent per year until he reaches 10 percent. His account will have a balance of $223,330 when he turns 65. For John, the power of 1 percent will earn him an extra $167,355 for retirement!


Why not increase your contribution to your 401(k) or 403(b) account each year until you reach at least 10 percent? A free online calculator can show you the effect that 1 percent will have on your retirement savings account. Do so gradually, and you’ll barely notice the change in your paycheck. And you’ll be taking a giant step toward a more solid financial future.