This figurative example is of a 23 year old employee who began investing in 2008 into the Co-operative Superannuation Society pension plan for credit union employees.
This example reflects a wage of $40,000 per year that increases at a rate of 3% (to compensate for inflation). This wage does not reflect any promotions or other wage increases.
Assumptions:
- Monthly wage of $3,333.34
- 3% annual salary increase
- 6% employee contribution and matching 6% credit union contribution
- $200 employee contribution + $200 employer contribution = $400 invested in total per month for the first year, increasing by 3% annually thereafter
- Rate of Return of 7.5% (based on 10 year past performance: 1998 to 2007)
(Note: additional employee contributions are not matched by the credit union)
Why is this so great? This just happens. You don't have to think about it and the credit union matches you dollar for dollar!
At age 57, this employee can retire a millionaire (and then some).
But wait, there's more - this employee also has the option of contributing more to their pension. That means they can retire either richer or earlier! It's a pretty sweet deal!
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