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Here’s How Much Contributing 1% More of Your Salary Could Boost Your Retirement Savings

Saving for retirement can feel daunting, especially with workers believing they’ll need about $1.46 million to retire comfortably, according to Northwestern Mutual. For some, retirement could cost $2 million or more.

Many workers aren’t able to save as much as they want — or anything at all right now. But that doesn’t mean a relaxing retirement is off the table. Below, we’ll look at how incrementally raising your retirement contributions could help you reach your long-term goals.

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Image source: Getty Images.

Can you save an extra 1% per year?

A popular rule of thumb for retirement savings says you should set aside 10% to 15% of your income each year. But that’s not realistic for a lot of people. You might only be able to save 5% right now. Or maybe nothing.

So rather than trying to boost your savings 10% in one year, start small. See if you can add just 1% more of your salary to your retirement savings each year. Median weekly earnings in the first quarter of 2024 were $1,139, according to the Bureau of Labor Statistics, which translates to an annual income of just under $60,000, and 1% of this would be $600.

That’s only $50 per month. By making this your goal, building up a retirement nest egg can feel less daunting. And though it might not seem like much, these small bits of cash can really add up over time.

Long-term benefits

Contributing 1% of your income might start out slow, but it adds up over time. The following table shows how your savings could grow over 10 years if you earn $60,000 per year and increase your retirement contributions by 1% of your salary per year:

Year

Monthly Retirement Contribution

Value of Retirement Savings at Year’s End, Assuming 10% Average Annual Return

1

$50

$627

2

$100

$1,944

3

$150

$4,019

4

$200

$6,929

5

$250

$10,757

6

$300

$15,595

7

$350

$21,544

8

$400

$28,715

9

$450

$37,320

10

$500

$47,223

Source: author’s calculations.

Even this doesn’t paint the full picture. If you reached $500 per month in contributions by year 10 and you maintained this contribution rate for another 10 years, you would have $196,497. If you kept it up for 20 years, it would be $609,594. And if you kept it going for 30 years, you would have over $1.68 million.

This also assumes your income doesn’t change at all over your career. If your salary rises, contributing 1% of your income to your retirement account could lead to an even bigger payoff. You could also expect more if you keep your money in a 401(k) that features employer matches for some of your contributions.

How to find the extra cash

Some people might be able to come up with 1% of their income just by making some changes to their budget. Perhaps they reduce discretionary spending or buy store-brand instead of name-brand items.

When cutting your spending isn’t possible, see if you can find ways to increase your income slightly. You might start a side hustle or work a little overtime here and there. Yes, increasing your income would technically increase your 1% savings target. But you could choose to stick to 1% of your original salary if you’re more comfortable doing so.

And if you’re not able to meet this goal every year, do what you can. Every dollar you’re able to save helps, and it might be easier in the future if you get a raise or find a better-paying job. Just remember to reevaluate your retirement savings goal and boost your contributions accordingly.

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