Fidelity asked Americans to guess how much $50 could grow into if left in a retirement account for 25 years. The results show Americans have a lot to learn.
When it comes to retirement savings, many Americans don’t realize the value of $50, according to a new survey.
Fidelity surveyed 1,039 American adults for a study launched in conjunction with America Saves Week. The idea is to show people the power of putting just 1% of their income toward retirement savings.
For a household making $60,000 per year, 1% is just $50 per month.
So how much money would accrue if that family continued saving 1% per month for 25 years? Fidelity asked Americans to guess, and the median response was $17,000.
In fact, the family would have about $40,000, according to Fidelity’s estimates, which are based on 7.0% annual interest, compounded monthly.
When survey respondents heard that number 74% said they would be more likely to save more. Of those already retired, 82% said they would have saved that much had they known.
“Saving for retirement is like training for a marathon—a solid plan with incremental increases along the way is key to crossing the finish line,” said Jeanne Thompson, vice president at Fidelity Investments, in a press release.
Still, Thompson said workers ought to save more than 1% of their income—preferably 10-15% of their income—to fully fund their retirements. But if that’s not possible, she said it’s better to start small and work your way up. For instance, you could start at 1% and increase by 1% each year until you reach your savings goal.
“People often grow complacent when it comes to saving for retirement, thinking they’ll have to make sacrifices that will impact their quality of life,” said John Sweeney, executive vice president at Fidelity, in the press release. “The truth is there are many things you can do now for your retirement that doesn’t involve much sacrifice at all and can help you get better prepared.”