Increase your 401K or IRA contribution by at least 1% every year
Money Tip:
Increase your 401K or IRA contribution by at least 1% every year
👉🏼Even better, have your 401K/IRA setup where it automatically increases every year. Most of them have this capability. Sometimes your Human Resources department can set it up for you like this.
👉🏼I made a huge mistake early in my professional working life that a lot of people make, I didn’t contribute at all! My excuses were… “I’ll save later”… “I just started my career”….”I need that money”. Please do not make the same mistake I did. I would probably have $200,000+ more in my 401K right now if I had started right away.
👉🏼If I could go back in time I would have started very small, maybe 1% and worked my way up by 1-2% each year or more. I would have started at 22 instead of 28.
👉🏼I know it doesn’t seem like a huge difference but it is in the long run. The power of compound interest is incredible.
👉🏼Experts state that we should be contributing 10%-15% of our income to 401K. An investment advisor who wrote an article on Forbes.com states 20%. That’s a lot but you can work your way up to that! I personally did usually 6-8% (when I finally started) when I worked my corporate jobs then slowly worked my way up to contributing an extra 10% to my self-funded IRA on top of that.
👉🏼Here’s a quick table to show you how little the difference is when you jump up just by 1% yearly. These are rough estimated numbers.
% | $40,000 Salary | $60,000 Salary | $80,000 Salary |
1 | $15.38 | $23.08 | $30.77 |
2 | $30.77 | $46.15 | $61.54 |
3 | $46.15 | $69.23 | $92.31 |
4 | $61.54 | $92.31 | $123.08 |
5 | $76.92 | $115.38 | $153.85 |
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