Savings Calculator: Does 1% More Make A Difference?

If you’re like me, your 401k plan comes with a little newsletter each month. A common theme in the world of personal finance advice is to nudge up your savings by one more percentage point a year.

For the “average” person, this is probably not a bad idea. According to the PSCA‘s 52nd Annual Survey of Profit Sharing and 401(k) Plans, the average contribution to a retirement savings plan in 2009 was about $2,114 at a rate of only 5.5% based on a $38,428 annual salary.

Assuming yearly salary raises of 3% and a 6.3% annual rate of return, bumping up that contribution rate by just one percentage point, to 6.5%, could potentially improve savings by close to $6,000 in 10 years and more than $46,000 in 30 years. [source]

But who’s average? The NY Times brings us another pretty interactive calculator where you can input your own numbers and play around. You’ll see what would happen if you increased your savings by one percent, and also what would happen if you increased your savings by 1% every year – up to a max of putting away 16% per year.

I always have to remind myself that $100,000 won’t buy nearly the same amount of stuff in 20 or 30 years. I need to check my math, but you could simply put down how much you expect your raises and investments to outpace inflation, which should provide inflation-adjusted amounts.


  1. Three percent raises annually? I should be so lucky. I haven’t had a raise in 26 months. But I upped my 401k by 2 percent, and it didn’t cost to much in after-tax take home. I’ll keep doing this as my debt goes down…

    I keep harping on my kids about 401ks or the equivalent. They are beginning, depending on their age, to get it. Start early is the best advice.

  2. This is probably one of the biggest things many people overlook, as you stated, “I always have to remind myself that $100,000 won’t buy nearly the same amount of stuff in 20 or 30 years.” Inflation is always the killer! So, even 1% makes a difference.

  3. Nice interactive calculator, but 15% is the max savings rate?!? I put in 17% into my 401k and max out two Roth IRAs! Not to mention the 25% or so in post tax savings as well…oh well I suppose I save enough then πŸ™‚

  4. The NY Time is implying that you shouldn’t be saving more than 15% of your income! I also save more than 15%, to try and hit the 401k maximum. Isn’t that a goal they should encourage?

  5. StackingCash says:

    What happens when the rate of return is negative??? Be careful, don’t let those big numbers seduce you into investing for that supposedly great rate of return. Look at what Madoff did.

  6. FYI – You seem to have missed the note at the bottom of the graph that says: “Savings are shown in today’s dollars, assuming inflation is 3 percent per year.” The results from the calc should be in today’s dollars, no mental adjustment necessary.

  7. @matt g – Thanks for that, I really didn’t notice it being there initially.

    However, in playing with the tool more, it doesn’t seem to work quite right. If you put down $100,000 income, no initial savings, 10% savings per year, 0% annual raises, 3% annual return, 5 year time horizon, then you end up with $50,000 saved. (10k x 5 years).

    However, if you really had 3% inflation, and no annual raises, you wouldn’t be saving $10k in today’s dollars every year. Your salary would shrink every year, again, in today’s dollars.

    So the annual raises input appear to be after/above inflation, while the annual return input appears to be before inflation. Hmm.

  8. Ha. That will teach me to accept the output of charts without running my own numbers. Something funny is going on here…


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