KnowHow Archive

Plan Sponsor Guide Participant Guide

No Magic Trick

The "magic" of compounding is one of the most basic principles of retirement savings—yet, it is often the most overlooked by participants already overwhelmed by the sheer breadth of fund choices.

Moreover, it is an established fact that saving a little bit, early in one's career, makes a more significant difference in terms of sheer account accumulation than saving more—even a lot more—later in life.  In a very real sense, time is money when it comes to saving for retirement. Consequently, getting participants to set aside even a small amount right from the first can make a big difference—to your plan and, more importantly, to the participant. h While it is as simple as "earnings on your savings earn more earnings," the impact in pure dollars and cents over time is nothing short of magical. h This month's issue highlights the impact of that "magic"—even on a savings rate as small as $20/week. Of course, the rate can be even greater thanks to the benefit of tax-deferred saving, and even more if there is a company match involved. h As we note in the attached, this is one time when something that seems "too good to be true" isn't. As always, we look forward to your comments and suggestions.
- The Editors