Retirement Hacks: Increase your 401(k) contribution by 1 percentage point to get the new year started right

The new year is a great time to refresh and often an inspiring time to find ways to improve a situation—why not start with a small but meaningful boost to your retirement savings?

Retirement Tip of the Week: Start the new year by increasing your 401(k) contributions by 1 percentage point, which might seem inadequate but will be a great way to bolster your retirement account.

If you already have your contributions automatically deposited into your 401(k) from your salary, ask your company to bump up the contribution by 1 percentage point. (If you aren’t automatically contributing to your 401(k), start the new year by enrolling in that.)

The difference out of your paycheck by increasing your 401(k) contribution will likely not hurt your net income as much as you may think it would, especially if you have a traditional 401(k) plan. With a traditional account, the money is deposited pretax.

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For some workers, the increase will also get them extra “free” money in the form of an employer match. Not all employees who work at a company with an employer match take full advantage of it, but meeting the maximum limit will grant them the most money their employer contributes to their 401(k) on their behalf. There may be some strings attached — for example, companies may require their employees work for a specific number of years before their match is fully vested.

For others, it’s just a boost to their retirement savings and the potential returns they could garner with that extra cash.

Want more actionable tips for your retirement savings journey? Read MarketWatch’s “Retirement Hacks” column

Take this calculation as an example. If a new worker who earns an annual gross salary of $100,000 on a biweekly schedule were to contribute 5% of her salary to her 401(k) with a $0 balance, she would have $58,338 in 10 years (assuming a conservative rate of return of 3% and no annual increase in her salary). Under the same circumstances, if she were to increase her contribution to 6%, she’d have $70,006 in 10 years — a difference of $11,668. Of course, this worker might also see raises and cost-of-living adjustments to her earnings, as well as a possibly higher rate of return, so the numbers would be larger.

Do you have questions about retirement, Social Security, where to live or how to afford it at all? Write to HelpMeRetire@marketwatch.com and we may use your question in a future story.