It is never too early or too late to improve one’s retirement savings level. An Individual Retirement Account is a great beginning but at any point, one can add to the security nest-egg by simply increasing the annual amount. An opportunity to increase personal financial security with extra income does not require advance preparation or complicated arrangements. It can be as simple as resolving to do better within the means at one’s disposal. A small increase can make a big difference in the outcome. To illustrate the point, the following example and discussion will use a one percent increase in funds set aside for that wonderful time after work and career.

A One Percent Increase

To take an average example, assume the median U.S household income is $50,000 per year. One percent of fifty thousand is $500. Thus, we will use $500 as the increase per year. For family budget purposes, we round he figures up to $45.00 per month. If the individual is age 40 and seeks to retire at age 65, then the $45.00 per month would run for 12 months per year, and over a period of 25 years ($45 x 300 = $13,500). Assuming the compounding, and investment return is ten percent per year for a total of $34,000.00 which when added to the contribution of $13,500 yields about $48,000.00. For an easy computation, we can convert this amount into an annuity contract for $50,000 that earns a net of six percent for 20 years. The monthly increase in guaranteed income would be about $350.00 based on a 20-year payout.

Further Enhancements

There are other ways to make the small monthly contribution larger. They include employer matching. Many employers allow special matching for older workers or those who have not achieved maximum benefits and participation. The household income figure should grow over the course of 25 years of savings, and the one percent contribution computed on a larger income base would provide a larger total in the end. The goal is greater financial security when retiring. Fortunately, people enjoy longer and healthier life spans in the current age than in any known earlier time. Medical advances promise greater health and longevity in the future.

Useful Tools and Techniques

A retirement income calculator can provide an easy way to calculate the differences that even small increases in monthly contributions can make for the retirees bottom line. The calculator can use the information about spending, expenses, and family details to make an informed decision about the amounts of assets one needs to live comfortably after the work and career are over. Social security and a pension may not provide enough for a comfortable level of spending. Additional income such as savings or a Roth IRA can make an enormous difference in the comfort and ease of one’s later years. Roth payouts have the particular advantages of no taxes and no mandatory withdrawal at age 70. A thoughtful approach to retiring provides the best benefits. There are many ways to increase assets particularly if not close to retiring; they include insurance and investments in real estate, stocks, mutual funds, bonds and other securities. The overall message is that small steps can add up to greater financial security.