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The Power of 1% Comments

  • By Amanda Steinberg
  • June 23, 2010

 

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By increasing the amount you save by a mere 1% every year, you could quadruple your nest egg. Here's how:

Bank on this
Let's say you make $60,000 a year, and that you're saving 5% of your income.

Let's also assume you have $14,000 in savings right now.

Your boss gives you a 3% raise per year.

You expect to earn, over a 20-year horizon (maybe you're 45 right now), an average rate of return of 7%.

Use this handy slider tool to run your own numbers.

Check this out
If you continue to save 5% of your income over those 20 years, you'll end up with $130,228.

But, if you were to increase that by just 1%—so now you're saving 6% during that time—you'd end up with $252,900.

Here's the kicker
BUT, by increasing your savings by 1% every year to a maximum of 16% (the limit of this particular tool)—letting it grow for the full 20 years...

You'll retire at 65 with $524,782. That's half a million dollars.

We dare you
Increase your savings by 1% today. Then brag or rant about the state of your savings.

Tagged in: Saving, Amanda Steinberg
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