How to multiply your retirement savings by 10 while barely lifting a finger | Personal finance

(Catherine Broc)

People say it’s hard to save for retirement. The hardest part, however, is the mental game – investing the money when you’d rather spend it. But once you’ve committed to saving, the mechanics of building wealth can be simple. You save, invest and watch your balance grow over time.

You can also add to this formula and multiply your results. There are two retirement savings tips, in particular, that are so simple and effective that you’ll want to implement them now. Keep reading to learn more.

1. Take your full employer

Employer matching contributions are the most valuable feature of your 401(k). Collecting all of your Employer Matches is an easy way to earn money – and the potential for wealth is enormous.

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Say you earn an average salary of $55,000 a year and your employer conservatively matches 50% of your contributions up to a cap of 3% of your salary. Under these rules, you will need to contribute 6% to get the full 3% from your employer.

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The table below shows the results over 30 years for three scenarios using the salary and matching rules above. The figures also assume an average growth rate of 7% per year.

Your contribution rate

Employer match rate

Total monthly contributions

Value of the match in 30 years

Account balance in 30 years
















Table data source: Author’s calculations via

As you can see, the employer match is worth up to $156,000. In real life, it could be worth a lot more if you could receive raises above inflation.

2. Automate contribution rate increases

Today, contribute enough to maximize your employer match – or more, if your budget allows. Tomorrow, plan to increase your contribution until you can no longer increase it. This is how you can multiply your retirement savings by 10.

To do this, enable your plan’s auto-escalation feature, if available. This feature automatically increases your contribution rate each year. You can set the increase to 1% or more and align it with your annual performance review. You may not notice the change in your salary, but you will see the growth in your retirement account.

What growth can you expect? Let’s say you earn a 3% annual salary increase. If you start with a contribution rate of 6% and increase it by 1% per year until you reach 15%, your results over 30 years will lean towards $1 million. That’s more than 10 times the savings balance you would have with a stable 1% contribution rate.

Efficiency of saving with pre-tax money

The beauty of the increase in pre-tax pension contributions is that it doesn’t sting as much as you might expect. Pre-tax deductions reduce your taxable income, which, in turn, reduces your payroll taxes. Consequently, the decrease in your net salary will be less than the increase in your pension contribution.

To put some numbers behind that, let’s go back to your $55,000 annual salary. If you are single, live in Florida, and have no federal deductions, your monthly take home pay with a 6% 401(k) contribution should be $1,718.

Increase the contribution rate to 7% and your take home pay drops from $17 to $1,701. But your pension contribution increases by $22. Cool, right? Saving with pre-tax money is effective – you might as well use it to your advantage.

Engage, then let it roll

Making the choice today to save for retirement, however uncomfortable, will be the hardest part of your journey to wealth. Take that employer match, set your contributions to automatically increase, and the rest is simple. Wait, watch, modify the plan as needed, and envision a retirement you’ll love.

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