Give it 1% more

"Give it one-hundred percent." Those words of encouragement make sense when you're, say, training for a marathon or interviewing for a big job

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"Give it one-hundred percent." Those words of encouragement make sense when you're, say, training for a marathon or interviewing for a big job. But when it comes to saving for retirement, let's be honest: giving it 100% just isn't realistic. When you have bills to pay, student loans to worry about, and you're trying to find a way to squeeze in a little fun, saving for retirement doesn't always make it to the top of your priority list. But what if you started with contributing 1% more of your salary into a retirement savings plan each month? As the Fidelity Viewpoints®article, "Just 1% more can make a big difference" explains, that could be as simple as packing your lunch—and that extra 1% could add up to thousands of dollars by the time you reach retirement.


There's this thing called compounding, and here's why it's great. Even if you can only afford to save a small amount each month, the interest your money may earn over time could do wonders for your cash flow in retirement. To see what I mean, let's take a look at a hypothetical example, where three savers, Bob, Suzie, and Andrew, challenge themselves to contribute just 1% more to their retirement account each month until age 67.1

First, a few assumptions:

  • For simplicity, we have our savers contributing to a 401(k), but this example could also apply to 403(b) and 457 accounts.
  • We assume our savers' salaries grow 1.5% a year—adjusted for inflation—which will boost their contribution amounts along the way.
  • Finally, we assume a 7% long-term compounded annual hypothetical rate of return, which aligns with an average long-term return for a growth-focused account.

As you can see, contributing just 1% more—no matter how old you are—can really add up by the time you reach retirement age. But things get really interesting when we take a look at what Bob was able to save, in our example. Even though he was saving less per month than Suzie and Andrew, he was still able to outsave both of them—and not just by a little. Because Bob started saving at a younger age, his savings had more time to grow—and it's all thanks to the power of compounding.2

That's great for Bob, but what about you?

To find out if you're on track, consider visiting Fidelity's Planning & Guidance Center where you can also estimate how saving more can help improve your income in retirement. If you’re ahead of the game, good for you. Behind? Don’t sweat it. Just remember that Fidelity recommends you save a total of at least 10% –15% of your income toward retirement (and that includes any matching contributions you may get from your employer). A good place to start could be taking Bob, Suzie, and Andrew’s lead, and challenging yourself to save just 1% more.


You can totally do this.

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Use Cinch to see where you can cut back on expenses—then see if you can save just 1% more.

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1. Hypothetical examples assume that the individual saves until retirement age 67, lives through age 93, and receives a 1.5% real (inflation-adjusted) increase in wages per year. Rate of return is 7.0% and consists of 4.5% real return and 2.5% inflation. These illustrations assume that deferral percentage rates stay constant throughout the individuals’ working careers. Estimated increases in retirement monthly income are in constant 2015 dollars. It is assumed that upon retirement the real (inflation-adjusted) dollar amount is withdrawn annually through age 93, and that the individual took no loans or hardship withdrawals from his or her workplace plan. The maximum annual qualified 401(k) retirement plan employee contribution limit in 2015 is $18,000 (or $24,000 if age is 50 or older). All dollars shown (including increases to yearly retirement paycheck) are pretax dollars. Upon distribution, applicable federal, state, and local taxes are due. No federal, state, or local taxes; inflation; or account fees or expenses were considered. If they were, returns and monthly increases would be lower. Hypothetical individual begins saving an extra 1% starting at the specified age which would increase along with assumed real wage increases of 1.5% annually until age 67
2. Systematic investing does not ensure a profit or guarantee against loss in a declining market.
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Fidelity does not provide legal or tax advice and the information provided above is general in nature and should not be considered legal or tax advice. Consult with an attorney or tax professional regarding your specific legal or tax situation.
Guidance provided by Fidelity through the Planning and Guidance Center is educational in nature, is not individualized, and is not intended to serve as the primary basis for your investment or tax-planning decisions.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes has been submitted.
IMPORTANT: The projections or other information generated by Fidelity’s Planning & Guidance Center Retirement Analysis regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary with each use and over time.
The images, graphs, tools, and videos are for illustrative purposes only.
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