Think pennies, save more: A simple shift that can enhance your retirement savings
There are two ways to contribute to Washington’s Deferred Compensation Program (DCP). You can choose to invest a set dollar amount every month, or you can opt to invest a percentage of your gross pay. DCP is a savings program, that helps you invest for the retirement lifestyle you want to achieve.
One way to make sure you’re putting away a smart amount is to think of your savings as a pennies-on-the-dollar amount rather than a percentage. If you’re saving 10% of your income, that’s 10 pennies for every dollar earned.
Making cents of the numbers
A recent study by Voya found that workers who saw their savings as percentages chose to save an average of 6.9%. But workers who saw their savings in pennies for each dollar saved an average of 8%.
The UCLA Anderson School of Management says that this change in how information is shown could increase retirement savings by almost 20% if it’s used over a whole career. Over time, saving just a few pennies more can add up to thousands of dollars of retirement funds.
Saving automatically
DCP has easy, smart investment options. You can either select your investments, or have your contributions automatically invested in the target date fund for your age. All funds are managed by the Washington State Investment Board.
When you save with DCP, your contributions are deducted from each paycheck and you have the option to increase or cancel your contributions at any time. DCP also offers an auto-escalation option, which automatically raises your contribution based on a frequency you choose.
Take action: Log in to your DCP account, visit “Contributions and Savings”, “Manage Contributions” and “Choose Set up Now” to create an automatic increase for your contributions.
Ultimately, no matter your financial situation, it’s important to save today. Saving now allows you to benefit from the power of compound earnings. Compounding is taking the money you earned from your investments and reinvesting it to earn even more, which helps your savings grow.
Estimate future potential DCP savings. Find out how much you can save, withdraw and how long your money will last with the DCP calculator.
See the list of employers who offer DCP.
Sign up by filling out the quick online enrollment form.
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