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Contribution level has greatest impact on your retirement income

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A lot of factors can affect the amount of your retirement savings – asset mix and market performance to name just two. But according to new research none will have as much impact as your contribution level.

In the past, the general rule of thumb was that you had to save 10% of your pay throughout your career to have enough for an adequate retirement income. However given historical market returns, an increase in life expectancy, and low interest rates, the research now suggests that you need to save at least 12% of your pay. If you start saving later in your career, that number jumps to 18% to 20%.

Under the Silver Thatch pension plan, you are required to contribute at least 5% of earnings each pay period. Your employer has to kick in at least another 5% – bringing the total of base contributions to a minimum of 10% of earnings. You need to consider whether that’s enough to meet your retirement income goals. If not, you may want to think about making additional voluntary contributions (AVCs). These are contributions over and above your base contributions.

The AVCs of saving for retirement

AVCs provide an easy and effective way to boost your retirement savings in the Silver Thatch plan. Here’s why:

  • You can make AVCs via payroll deduction or lump sum payment.
  • You can start, stop or change the level of your AVCs at any time.
  • You decide where to invest your AVCs, picking from any of the plan’s managed investment portfolios.
  • The plan’s investment portfolios are professionally managed funds of a quality typically not available to investors with modest amounts of money.
  • AVCs give you some control over the risk-reward balance of your overall savings in Silver Thatch. This is because you can choose to invest your AVCs in more aggressive or more conservative investments.

If you’d like to start making AVCs, simply complete an Additional Voluntary Contribution Form. You can get a copy from your employer or by clicking here. If you make AVCs through payroll deduction, deductions will typically start in the next full pay period.

Estimate your retirement income with the Silver Thatch Retirement Calculator here.


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