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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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