The Power of 1%
Sometimes the little things in life make the biggest difference. That’s true when it comes to saving for retirement too.
When you start saving for retirement, aim for an amount that’s manageable (perhaps contributing enough to get the most out of the employer match – if you contribute 6%, you will receive the maximum match of 3.5%).
Then, challenge yourself to save 1% or more each year toward retirement. While 1% is a small percentage of your annual earnings, after 20 or 30 years it can make a big difference in your total savings. Remember, a key to growing your savings is to increase your contributions each year. To do this, take advantage of the Annual Increase Program.
- What is the Annual Increase Program?
The Annual Increase Program allows you to establish regular annual increases to your retirement plan contribution amount. You may increase your contributions 1% or more each year automatically up to IRS and plan limits.If you coordinate your increase date and amount with expected pay increases, you may be able to realize both an increase in take-home pay and a higher retirement savings plan contribution.
Use the Take Home Pay Calculator to see how an increase could affect your take home pay.
- How do I elect the Annual Increase Program?
Log into netbenefits.com. Choose the contributions tab, and then click on the Annual Increase Program to enroll. Simply choose the percentage amount of the increase and the date of the increase.
- How does my Annual Increase Election get applied?
Your Annual Increase Election will be reflected in your pay within 1 to 2 pay periods after your increase date. If you want to time the program increase to coincide with a pay raise (usually in the August timeframe), determine the length of time it normally takes for new contribution elections to take effect and choose your increase date accordingly. Your increase election will be applied across your contributions based on plan rules.
Overall, Fidelity recommends building up to saving 15% of your income toward retirement annually (including any contributions your employer may make to your account). But remember, you don’t have to get there overnight, and you can change your contribution amount if you need to. Go ahead, challenge yourself to save a little more. Whether it’s a 1%, 3%, or even 5% increase, the extra money you save today could make a big difference in helping you achieve the retirement you envision.