Interesting example of what a small bump up does to your long term savings:


Click for interactive calculator:
Source: NYT

Category: Consumer Spending, Digital Media, Investing

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

11 Responses to “The 1% More Savings Calculator”

  1. Bob A says:

    now imagine what a difference it would make if you establish a policy of not buying anything unless you can get it for 10, 20, 30, 40, 50% off the ‘normal’ price. and don’t forget that tax savings that go along with that.

  2. rd says:

    One of the little tricks that we have done over the years is increase the percentage taken out of our pay in 401ks and 403bs by 1% every time we got a pay increase until we bump against the maximum permitted deductions. I would try to do 2% in years when the markets were tanking. You didn’t even know the money was missing because you had never had it before. Years when pay increased by inflation or less only, you would feel a small pinch, but in years when pay went up more than inflation it still felt like your pay was rising.

    Doing this allowed us to increase our savings rate from 6% of pay to almost 20% (including the catch-up contributions) over the past 20 years. Employer contributions have typically added another 3% to 15%annually (variable depending on employers) to that savings rate over that time period. It adds up over time.

  3. tagyoureit says:

    Imagine what a difference it would make if you could only sell your product/service at 50% of its ‘normal’ price.

    Or better still, imagine what a difference it would make if you would only buy labor at 50% of its ‘normal’ price. Capital is basically free (for those able to borrow at near 0%).

  4. winstongator says:

    Do they cap their savings rate at 16% because of 401k limits?

    An idea I have had for a while about higher savings rates is it doubly insulates from when $h!t happens. First you have the savings in your account. Second, your baseline spending level is lower – it’s less of a lifestyle change to ramp down your savings rate, than to cut spending.

  5. kaleberg says:

    Actually, it’s rather sad. Most households have an income of less than $45,000 a year, and since they don’t want to live in the street, need to eat and operate and automobile and so on, they maybe save 1-2% of that, usually to get it all wiped out when they get sick, their car needs tires or they need to move. Worse, most Americans haven’t gotten a raise since 1979 and aren’t likely to any time in the future. The stupid calculator also ignored the 50s cliff in which salaries plummet when workers hit 50 and rarely recover. Saving an additional 1% gets them an additional $25,000 or so after 30 years. Does that really sound worth it? Things like this make saving look like a suckers game.

    (That assume a 5% estimated return which means beating the typical mutual fund operator for 30 years running.)

  6. peterkrause says:

    I would like to point out that 1% bump in savings is blind, to your ethnicity, tax bracket, whatever. One percent more adds up, period. Its not my favorite book like Absalom, Absalom or Franny and Zooey, but The Millionaire Next Door makes the point quite nicely. And any American who puts their mind to it can save more by putting aside a case of brewskies or changing to a feature phone, basically any status crutch they feel they can’t do without, if they seriously want to they can do it. Granted there will be special cases, but “most households” give a lot of lip service and get a lot of drive thru. Look in the mirror and decide.

  7. peterkrause says:

    Also, although company-match dollars are going away fast, one of the best investments you can make is maxing your 401k contributions. Math is phat!

  8. dc20008 says:

    I max out my IRA contribution every year. I don’t wait for the annual contribution deadline (April 15) either. I set aside a monthly amount in a separate savings account for IRS and IRA (self employed)–if the market tanks badly I quickly have my rep toss in cash to maximize my benefit.

    We don’t have cable. We don’t drive BMWs. We don’t run the A/C at 66 degrees.

    I won’t be eating cat food when I am 75 either.

  9. louiswi says:

    We adopted this philosophy over 50 years ago. BRs advice combined with Bob A advice. We are the multi-millionaire next door. you would never know it by our looks. It takes time, but it does work!

  10. Livermore Shimervore says:

    it’s great to increase your contribution, pinch pennies and toss in extra money when it comes in.
    But yet many will see all of these supplemental contributions erased when they fail to realize how much of their contributions are being witheld from the excessive fees of some actively managed mutual funds, particularly those in a typical 401K plan. It’s akin to sending in another $100 to a month to pay off the credit card without thought of transferring the debt away from a card with a 30% interest rate — unecessary throwing away of tens of thousands of dollars for decades. Seek out the index funds if they meet your objectives, they are the equivalent of a near 0% interest rate card.