Can $100 a Month Make a Difference?

Yes, saving even small sums regularly can yield big results over time.

Say a 25-year-old worker contributes $100 a month to an investment account with a 6% compounded annual return. After 40 years, that worker will have contributed $48,000, but the balance may have grown to $185,714.¹  That’s the power of compound interest at work.

What Is Compound Interest?

Compound interest is when you earn a return on your original investment and on the earnings that you invested in the account over the years. And compounding works on even modest sums, like investing $100 a month.

Of course, if your long-term goal is retirement, you’ll need to save more. If your budget doesn’t have much room for savings, look for ways to free up money, such as canceling streaming services you no longer use or dining out less. People ages 25 to 34 spend an average of $347 per month on eating out, according to the Bureau of Labor Statistics.²

Here are some other ways to simplify saving for retirement:

Automate Your Savings

One of the easiest ways to do this is by investing in your workplace retirement plan. You can have a certain amount of money deducted from each paycheck before taxes and deposited in your workplace retirement plan. This reduces your current taxable income. Workers under age 50 can contribute up to $23,500 in a 457(b), 403(b), or 401(k) plan in 2025.

Keep Investing Simple

Many plans offer target-date funds.³ Workers choose the fund with the date closest to their year of retirement, and a professional manager handles all the investment decisions within the target-date fund.

Increase Your Savings When Possible

The standard recommendation is for young workers to save 15% of their gross income for retirement. If that’s too steep for you, save what you can and commit to increasing your savings by, say, two percentage points each year until you reach your savings target.  Use our Grow Your Savings Calculator to see how increasing your plan contributions, even by a small amount, can help yield sizable benefits.

Disclosures

^{1 This illustration regarding compounding or the likelihood of various investment outcomes is hypothetical, is based on a 6% yearly return compounded annually, does not reflect actual investment results, and does not guarantee future results. Results may vary with use and over time, reflecting any changed circumstances, assumptions, or variables upon which the information is based. Projections involve known and unknown risks, uncertainties, and other factors, which may cause actual results to differ materially and substantially from any future results or performance expressed or implied by the projections for any reason. Projections do not guarantee that a particular result will be produced or achieved. The projections do not represent actual securities or client performance and cannot determine which securities to buy or sell or if your investment strategy is appropriate. Source: Compound Interest Calculator, U.S. Securities and Exchange Commission, April 2025.}

^{2 “Table 1300. Age of Reference Person: Annual Expenditure Means, Shares, Standard Errors, and Relative Standard Errors,” Consumer Expenditure Surveys, Bureau of Labor Statistics, 2023.}

^{3 The Fund is not a complete solution for all of your retirement savings needs. An investment in the Fund includes the risk of loss, including near, at, or after the target date of the Fund. There also is no guarantee that the Fund will provide adequate income at and through an investor’s retirement.}

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