You probably think of cash in your wallet (for spending and bills) as separate from the cash you contribute to your retirement account.
But as a woman, you need to think of those day-to-day dollars in investing terms as well, especially when you consider your financial road map.
Your lifecycle may require you to save at different rates at different times—because you don’t want to outlive your savings.
Let’s say you have a choice between spending $5 each day or investing it.
What happens if you take that $1,750 per year and add it to your 401k, assuming a return rate of 5%?
|At 40, let’s say you have a 401k worth $100,000. If you contribute $10,000 each year and your employer throws in $5,000 a year, adding another $1,750 to your yearly contribution bumps up your total portfolio at age 65 from $1,090,337.30 to $1,178,035.84—that’s another $87,698.54.|
|At 30, let’s assume you have a 401k worth $40,000. If you contribute $4,000 per year and your employer adds another $2,000, your $5 a day additional contribution would make your total stash at 65 worth $955,622.12, an increase of $165,963.56.|
It’s easy to get daunted by the idea that you need a big pot of gold at the end of your road map. But even in small amounts, a little bit of cash can do big things for your portfolio.