Issue #22: 1% Can Change Your Retirement Forever
This tiny 1% secret could quietly make you rich.
Reading time: 2 minutes
A single drop of water hits a bucket. It doesn’t seem like much. But what if the drop falls every day? Soon, the bucket overflows. That’s the power of saving just 1% of your income. It’s small and simple, but over time, it transforms your future in ways you’d never expect.
Let’s say you’re 25, earning $36,000 a year, which is about $3,000 a month after taxes. One percent of that monthly income is $30, just $360 annually. Tuck that $30 away every month for 40 years and invest it in the S&P 500 index fund, $VOO. Historically, it averages a 7% return after inflation. After four decades, you’d have $74,146.26, having only invested $14,400.
Imagine the same $30 a month for 40 years but invested in Bitcoin. To project its compound annual growth rate (CAGR), we could use the formula:
CAGR = ((year+1)/year)^5.7
Year counts from January 3, 2009, when the Genesis Block appeared. 40 years from 2025 equals 56 years from the start. That yields a CAGR of 10.62% in 2065. Averaging returns from 2025 to 2065 gives about 19.59%. To be conservative, let’s lower that to 15%. Under a 15% annual return, regular deposits of $30 a month can grow to around $683,394 after 40 years.
Maybe you’re 35, 45, or 55, and 40 years seems far off. It doesn’t matter. Nearly everyone carries a small cost that can be cut without altering their lifestyle. A forgotten subscription, a toxic habit like cigarettes, or a needless treat such as a bag of Oreos on the way home all offer a chance to cut costs. A small percentage set aside always adds up.
Bernstein found that a 1% increase in investment return can extend your retirement savings by 10 years. That’s an extra decade of financial security.
You don’t need big changes or sacrifices. Find that 1% of wasted money and redirect it to investments. Pay yourself first and let time work its magic.
Thank you so much for reading! See you next week.