Mastering your Retirement: The Impact of Consistent Savings
For many workers, saving hundreds of thousands of dollars is necessary for a comfortable retirement. To help grow your savings, consider automating your retirement contributions.
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Small Steps Lead to Big Savings
Consistently saving a smaller amount can often result in more savings than making a one-time large investment. For instance, consider the scenario of saving in a 401(k) with an average annual return of 8%.
Imagine you contribute $50 every month versus investing $5,000 all at once, and then not adding anything further. The table below shows how your savings would stack up over time:
| Number of Years | Total Savings: Contributing $50 per Month | Total Savings: Contributing $5,000 Upfront |
|---|---|---|
| 20 | $27,000 | $23,000 |
| 25 | $44,000 | $34,000 |
| 30 | $68,000 | $50,000 |
| 35 | $103,000 | $74,000 |
Data source: Author’s calculations via investor.gov.
Investing a lump sum isn’t inherently bad, but many individuals lack the funds for such a large commitment. Regular monthly contributions are more achievable for many, leading to impressive savings over time.
By automating transfers from your paycheck or bank account into your retirement fund, you create a reliable investment routine. Over the years, even modest contributions can translate into significant savings.
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