Possible Benefits of Increasing Contributions
We all wish we could invest the maximum amount possible and enter retirement with more money than we know what to do with. Then, for most of us, reality sets in and we go with what we can afford.
Even if you can’t contribute the maximum, consider your goals and factors that may affect how far your money will go. It may be smart to increase your contributions to better prepare for the following:
- Lifestyle – Consider how you want to live in retirement. Will you be content with gardening and an occasional weekend trip or are you looking forward to a condo on the beach and golf several times a week? Whatever lifestyle you choose will have an impact on how much you need to invest now.
- Inflation – The United States has experienced inflation every year, except two, since 1955. Chances are good that things will cost more in the future.1
- Healthcare – Healthcare costs now account for more than 20 percent of all personal spending, double what it was in 1970.2
- Longevity – Whether you’re 20, 40 or 60 years old, living past 100 is becoming more and more common.
Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.
A little goes a long way
Even a little bit more each payday can really add up over time. Then, consider committing to contribute half of every raise and bonus to your Plan account. That’s an easy way to bump up contributions regularly, without "feeling it".
Look at this chart for an idea of how even small deferrals can potentially add up. The chart shows hypothetical account values at retirement based on an investor’s current age and deferral amount.
You’re in Control With Deferred Comp
Smart choices can lead to goals met.
The chart below shows hypothetical account values at retirement.
| Growth Period | Ending Balance | ||||
|---|---|---|---|---|---|
| Deferral Per Pay | Paycheck Impact | Annual Pay Reduction | Accumulation 10 Years | Accumulation 20 Years | Accumulation 30 Years |
| $25 | $18.75 | $488 | $9,304 | $27,605 | $63,607 |
| $50 | $37.50 | $975 | $18,607 | $55,210 | $127,214 |
| $75 | $56.25 | $1,463 | $27,911 | $82,815 | $190,821 |
| $100 | $75.00 | $1,950 | $37,214 | $110,420 | $254,428 |
| $125 | $93.75 | $2,438 | $46,518 | $138,025 | $318,035 |
| $150 | $112.50 | $2,925 | $55,821 | $165,631 | $381,642 |
| $175 | $131.25 | $3,413 | $65,125 | $193,236 | $445,249 |
| $200 | $150.00 | $3,900 | $74,429 | $220,841 | $508,856 |
| $225 | $168.75 | $4,388 | $83,732 | $248,446 | $572,463 |
| $250 | $187.50 | $4,875 | $93,036 | $276,051 | $636,070 |
| $300 | $225.00 | $5,850 | $111,643 | $331,261 | $763,283 |
| $350 | $262.50 | $6,825 | $130,250 | $386,471 | $890,497 |
| $400 | $300.00 | $7,800 | $148,857 | $441,681 | $1,017,711 |
| $450 | $337.50 | $8,775 | $167,464 | $496,892 | $1,144,925 |
| $500 | $375.00 | $9,750 | $186,071 | $552,102 | $1,272,139 |
| $550 | $412.50 | $10,725 | $204,678 | $607,312 | $1,399,353 |
| $600 | $450.00 | $11,700 | $223,286 | $662,522 | $1,526,567 |
| $711 | $565.00 | $14,690 | $267,416 | $805,421 | $1,887,812 |
| $731 | $548.00 | $19,000 | $274,647 | $827,200 | $1,938,859 |
| $750 | $563.00 | $19,500 | $281,875 | $848,968 | $1,989,880 |
This table shows the cumulative value of 26 biweekly deferral amounts over 10, 20, and 30 years, assuming a compound annual rate of 7% and a 25% federal tax rate, for a single person with an annual salary of $38,000 and one deduction for federal tax purposes. Actual investment returns will vary from year to year, and the value of your account after the specified periods of years shown in the table may be less or more than the amounts shown. This illustration is hypothetical and is not intended to serve as a projection of the investment results of any specific investment. If fees and expenses were reflected, the returns would have been less.
Get the help you need
Talk with your Account Executive to increase your contribution amount or for more information about planning for your retirement.
1Historical Inflation, Inflationdata.com,http://inflationdata.com/inflation/inflation_rate/HistoricalInflation.aspx?dsInflation_currentPage=2(accessed 10/3/11)
2The National Retirement Risk Index, Center for Retirement Research at Boston College, February 2008
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