According to Stuart Robertson, president of ShareBuilder 401k, just a $500 increase in annual savings can result in an extra $110,000 over a 40-year time horizon. Discussing the infographic and underlying savings math with PLANADVISER, Robertson noted that a $500 increase matches the Internal Revenue Service (IRS) deferral limit increase scheduled for plan year 2015.

The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan increased from $17,500 to $18,000 for the 2015 plan year. The catch-up contribution limit for employees aged 50 and over also increased $500, from $5,500 to $6,000. Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000 (see “Some Context Around 2015 Deferral Limit Increases”).

ShareBuilder’s hypothetical illustration shows the impact of investing an extra $500 per year over a period of 40 years, based on an averaged 7% rate of return in a tax-deferred 401(k) account. The results include the reinvestment of all interest and assumes no distributions or other tax considerations, Robertson explained.

“The deferral limit increase seems fairly minor at first blush, along with the increase in the maximum catch up contribution, which was also $500 for 2015,” Robertson said. “But looking at the math a little closer and thinking long term, there is nothing minor about the increase or the opportunity it presents to retirement plan participants.”

As outlined in the infographic, 10 years of saving an extra $500 per year will lead to extra wealth equivalent to the price of a Caribbean vacation, or about $7,254. In 20 years, the additional $500 per year will result in extra wealth approximately equivalent to a full year’s tuition at a median range college, or about $21,832. Thirty years of this will result in enough extra wealth to cover a new luxury car, or about $51,129.

“If you are a young worker and you only recently entered the workforce, that extra $500 per year over a 40-year career brings an extra $110,000 in ending wealth,” Robertson said. “That’s dramatic, and we encourage sponsors and advisers to use our infographic to help people think about putting away something for retirement in the same way they think about saving up for a house or a car. We want to ask what they can do with each paycheck or even on an annual basis that will move them closer to the end goals.”

Robertson continued by noting relatively few savers are able to consistently hit the IRS deferral limits—especially when it comes to workplace retirement investors at the lower ends of the income scale. But this doesn’t mean the benefits of saving an extra $500 are limited to more affluent retirement savers: minor increases in recurring savings today become significant increases in wealth over long periods of time, regardless of the wealth level, and should be encouraged among all participants, he said.

“One piece of the infographic that really jumps out is the coffee cup icon, and just the note that $500 a year is equivalent to two cups of premium brewed coffee per week,” Robertson said. “It really makes you think about how much extra room there is in your budget to find an extra $500 per year, even when things are tight and you’re not the wealthiest person contributing to a 401(k).”

Robertson concluded by noting the infographic could be a helpful presentation tool to deliver alongside a bonus or merit increase. “You can use it to make the case that this extra money will do so much more if it’s directed into the tax-advantaged savings account, rather than just going into your pocket,” he said.

 More information on the firm is available at www.sharebuilder401k.com.