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Best Way to Increase Retirement Savings

Any investment portfolio has two engines of growth: the contributions made by the investor, and the rate of return generated by the portfolio. But which has the greater impact?

For an investor who begins contributing to an investment portfolio at 25, the baseline terminal value at 65 is $528,007. If the annual portfolio return increases to 10% and the savings rate stays at 6%, the portfolio value at 65 soars to nearly $1.4 million. On the other hand, if the savings rate increases to 10% a year and the portfolio return stays at 6%, the ending portfolio value at 65 is $880,012.
Of course, one might suggest that the best of all worlds for a 25-year-old client is to save 10% of income each year and have a portfolio return of 10%. No question about that - the ending portfolio value would be a sweet $2,321,264.
http://www.financial-planning.com/fp_issues/43_7/best-way-to-increase-retirement-savings-2685423-1.html

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