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When it comes to saving for retirement, most people aren’t saving enough—and they know it. Of those who are already saving, a Ramsey Research study found that 70% wish they could save more. That makes sense in light of the fact that only one in 10 Americans are saving the recommended 15% of their income toward their future.
But planning for your retirement doesn’t have to be difficult or complicated. Increasing the size of your nest egg—and your ability to live out your dreams in your golden years—can be as simple as increasing the percentage you put toward retirement every month.
Consider David and Susan to see how a simple change can make a big difference.
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A Little Goes a Long Way
David and Susan are both 35, making the average household income of $56,000 per year. They started contributing a total of 5% of their income into their 401(k) plans last year to take advantage of the employer match offered in their plans.
After meeting with their investing pro, David and Susan realize that investing 5% of their income won’t be enough to fund the family vacations they dream of taking in retirement. So they map out a plan.
Only one in 10 Americans are saving the recommended 15% of their income toward retirement.
With the help of their pro, David and Susan set a goal to contribute 15% of their income toward retirement. That’s a big leap to make at once, so they decide to bump up their contribution to 8% this year. That’s only $140 more per month than they invest right now! The next year they’ll increase their percentage to 11%. The year after that, they’ll make a 4% jump to reach 15% of their income.
Since they’re already investing enough to receive their full 401(k) match, they’ll focus on funding two Roth IRAs, taking advantage of the Roth’s tax-free growth. They can contribute up to $5,500 in each Roth IRA—more than enough to meet their 15% goal. Now all David and Susan have to do is maintain their momentum, and they’ll have a hefty nest egg by the time they retire at 65!
Had David and Susan kept their retirement contributions to just 5% of their income, they would have saved only $559,585 by retirement. Not quite enough for those dream vacations. But because they gradually increased their contributions up to 15%, they’ll retire with almost $1.5 million!
You might be thinking that David and Susan’s experience sounds great . . . if you’ve still got 30 years to invest. But regardless of how close you are to retirement, it’s not too late to make a difference.
Living Your Dreams in Retirement
Research suggests that both savers and non-savers have similar visions of retirement bliss spent enjoying their family and traveling. If you’ve followed the Baby Steps, by the time you’re ready to retire you‘ll be debt-free, including your home. And when you have no payments, you increase your chances of turning your retirement dreams into reality.
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Imagine being able to take your family on an all-expenses-paid trip to the beach! Maybe your dream is to spend mornings woodworking and afternoons gardening with your grandkids. Or perhaps you’ll finally go on that Alaskan cruise. After patiently saving for decades, you can enjoy the fruit of a lifetime of hard work.
Like Dave always says, “If you live like no one else, later you can live and give like no one else.”
Start Small and Work Your Plan
It’s time to get serious about your future! If 15% of your income seems like a lofty goal, invest just 3% more a month than you are right now. Bump up your investment each year until you reach your 15% goal. That gradual increase in your contributions could make a million-dollar difference, like it did for David and Susan.
Gradually increase your retirement savings each year until you reach your 15% goal.
Wondering where you’ll get an extra 3%? Try one of these retirement-boosting ideas!
- Pick up a side job. Think about what you already enjoy doing and get creative about how you can use your talents to bring in a little extra money.
- Give up something. What if you brought your lunch to work instead of eating out every day? That could be an extra $200 a month toward retirement.
- Create a zero-based budget. Sometimes it’s not about making more money; it’s about telling your money where to go.
Partner With a Pro
If you’re not sure where to begin, meet with an investing professional who can help you stay on track with your retirement goals. Once you know what your dream looks like, your investing professional can help you develop a strategy to get there. And getting connected with a true pro in your area is completely free. Find your investing pro today!