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2017 Cash Flow Checklist: Part III Thumbnail

2017 Cash Flow Checklist: Part III

By: Mike Earl

Bump up that 401(k) contribution percentage

We coach all of our clients to aim for a retirement savings rate equal to at least 15% of their gross income.

Let's say you're not anywhere near that number today, and let's also assume it's not realistic for you to triple your 401(k) contribution immediately, from 5% up to 15%.

How about increasing your contributions by 1% each year? A 1% bump-up in retirement savings each year is not going to your monthly take-home pay by all that much, so it should be a doable step for all of us. Especially if you just received a raise heading into 2017. You would just be allocating part of your increased income toward increased contributions into your 401(k).

In the scenario below, we examine the long-term effects of those annual increases to 401(k) contributions. The results are staggering.

This is a hypothetical example for illustrative purposes only. It does not represent an actual investment. Actual investor results will vary.