Saving $50 More Per Month Can Make Your Future More Comfortable
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Saving $50 More Per Month Can Make Your Future More Comfortable
By Shaun King and Tim Ayler, CPA | Members of the Audit & Other Assurance Services
As a trusted advisor, one of our responsibilities is to help you plan for the future. This article is not about making you a millionaire by contributing an extra $50 a month to your savings or company retirement plan. This is about how small sacrifices today can result in a nice boost to your retirement.
Many of us strive to find the right financial balance between our current lives and planning for our futures. While most of us are already saving for retirement, chances are, we can do more. If you look hard enough, finding a way to save an extra $1.64 per day without making a drastic change to your life can be done.
It could be by bringing your lunch to work a couple of days a week instead of purchasing fast food. Perhaps you can have home-brewed coffee a couple days a week, rather than a $5 venti cappuccino. How about cutting back on your cable bill? Or maybe you could car pool a couple of days of week to work. This would surely result in savings on gas, parking expenses, and additional maintenance.
This commitment of an additional $1.64 a day could result in an extra $600 a year on top of your current investments, all while not drastically changing your lifestyle.
Making $600 a Year Work For You
The table below shows how an extra $50 a month until retirement could increase your retirement savings, based on various potential rates of return and time:
| Years Until Retirement | Total contributions | 10% Annual Return | 8% Annual Return | 6% Annual Return | 4% Annual Return |
| 40 years | $ 24,000 | $ 318,840 | $ 175,715 | $ 100,072 | $ 59,295 |
| 35 years | $ 21,000 | $ 191,415 | $ 115,459 | $ 71,592 | $ 45,839 |
| 30 years | $ 18,000 | $ 113,967 | $ 75,015 | $ 50,477 | $ 34,818 |
| 25 years | $ 15,000 | $ 66,895 | $ 47,869 | $ 34,823 | $ 25,792 |
| 20 years | $ 12,000 | $ 38,285 | $ 29,648 | $ 23,217 | $ 18,400 |
| 15 years | $ 9,000 | $ 20,896 | $ 17,417 | $ 14,614 | $ 12,346 |
| 10 years | $ 6,000 | $ 10,328 | $ 9,208 | $ 8,234 | $ 7,387 |
Data from GCPAs� calculations. Assumes monthly contributions and compounding
If you’ve reviewed your personal budget for the year and just don’t see any way of investing an extra $50 a month, perhaps you could consider starting the next time you get a raise. After all, you lived on your previous salary.
The above example does not take into consideration the current tax reduction resulting from an increased contribution to your deductible retirement account. Just contributing $50 a month to an investment account won’t result in you becoming a millionaire (but multiply the numbers above by 4-eg $200 per month, and you might!). However, combined with your current savings and potential employer matching contributions, it could be the difference between a comfortable retirement and one full of financial opportunity. The earlier you get started, the more time you have to let the compounding work to your benefit.
Contact:
Shaun King | Senior, Audit & Other Assurance Services | 317.260-4415 | sking@greenwaltcpas.com
Tim Ayler, CPA | Partner, Audit & Other Assurance Services | (317) 260-4401 | tayler@greenwaltcpas.com