How small paycheck tweaks can mean big savings later.
Contributing through salary reduction and taking advantage of tax deferral can significantly grow your savings over time.
What Is Salary Reduction?
Salary reduction means choosing to have part of your paycheck go straight into your retirement plan before taxes. This lowers your taxable income and helps you save more efficiently.
For example:
Earn $50,000 a year
Contribute 10% = $5,000
You’re only taxed on $45,000, not $50,000
Why Tax Deferral Matters
With pre-tax contributions, your money grows tax-free until you withdraw it in retirement. That means no annual taxes on earnings—just uninterrupted growth.
How Compounding Works in Your Favor
Let’s say you contribute $5,000 per year with a 7% average return:
After 10 years: ~$69,000
After 20 years: ~$219,000
After 30 years: ~$500,000+
That’s the power of compounding without taxes slowing you down.
Start Early, Benefit More
The earlier you start, the more time your money has to grow.
Start at 25: $200/month could grow to ~$500,000 by 65
Start at 45: Same amount = ~$100,000 by 65
Bottom line: Time = Growth.
The hypothetical examples of mathematical compounding are used for illustrative purposes only and do not represent the performance of any specific investments. Taxes are not considered. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involved a higher degree of investment risk. Past performance is no guarantee of future results. Actual results will vary.
Take Action Now
Every paycheck is a chance to invest in your future. By using salary reduction and taking advantage of tax deferral, you can build a stronger retirement—without feeling the full cost today.
Talk with your benefits office or plan provider to get started or increase your contribution.
This information is not intended as tax or legal advice. For advice concerning your own situation, please consult with your appropriate professional advisor.
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