These hypothetical examples of mathematical compounding are used for illustrative purposes only and do not represent the performance of any specific investment. They assume a monthly deferral of salary and monthly compounding of earnings. Fees, expenses, and taxes were not considered and would reduce the performance shown if they were included. Actual results will vary. What Percentage of Salary Should You Contribute? Financial professionals often suggest that you save at least 15% of your salary throughout your career. For those who start late, higher contribution rates may be necessary. Remember that if you are behind schedule, any savings increase is better than none. Many employer-sponsored plans offer an option to have your contribution rate increased automatically each year, typically by 1%, which could make a big difference over time. The Power of 1% Mark and Jason are hired at the same time with a $50,000 starting salary, and they both start contributing 6% to their retirement plans right away. Mark maintains the same 6% contribution level throughout his career, whereas Jason increases his contributions by 1% annually until he is contributing 15% of his income each year. After 30 years, Jason would have accumulated more than twice as much as Mark. $351,760 $757,502 Mark Jason Assumptions: 3% annual salary increase 6% average annual return 30-year time frame
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