1 simple move that can turn $ 40 per month into $ 71,500 per retirement age

Saving for retirement is a challenge, especially when money is tight. According to a survey by Charles Schwab, nearly 60% of Americans say they live paycheck after paycheck, and finding cash in your budget to invest in your retirement fund can often seem impossible.

However, you don’t need to make drastic budget cuts to save more for retirement. In fact, this simple gesture can help you turn a few dollars a month into tens of thousands of dollars in retirement savings.

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The smallest changes can make a big difference

It’s easy to fall into the trap of thinking that if you don’t have much to spare, it isn’t worth saving at all. But increasing your savings rate even by 1% can make a significant difference down the road.

The average American begins saving for retirement at age 31, according to a Nationwide report. In addition, the median income of American adults is around $ 48,000 per year, according to data from the Bureau of Labor Statistics.

Suppose you make $ 48,000 per year and save 10% of your salary (or $ 400 per month). If you started saving at age 31 and earning a 7% annual rate of return on your investments, you would have savings of $ 714,785 at age 67.

However, if you increased your savings rate by just 1% – contributing 11% of your salary, or $ 440 per month – you would have saved $ 786,263, all other factors remaining the same. That’s a difference of about $ 71,500.

Why you might save more than you think

While $ 71,500 is already a good chunk of the change, there’s a chance you can save a lot more than that without lifting a finger.

These calculations assume that your income will stay the same from 31 to 67, but in reality, your salary will likely increase with age. So even if you continue to save the same percentage of your income, the amount you contribute will increase, which can cause your total savings to skyrocket over time.

Plus, if you save in a 401 (k) and have access to matching contributions from your employer, you could save even more. If you save an extra 1% of your salary and your employer matches those contributions, you could potentially double your total savings with no extra effort on your part.

Money is tight right now for millions of Americans, and saving for retirement may be low on your priority list. However, even if you don’t have much to spare, every little bit counts. By increasing your savings by just 1%, you can see a huge difference in your total savings when you retire.