“Push the envelope and you can lick the savings problem.” The more you save, the more that’s available to compound and grow. So, it’s smart to contribute as much as you can to your employer-sponsored plan. In 2004, the maximum contribution is the lesser of $13,000 or 100% of your income. Plus, if you’re age 50 or older, you can make catch-up contributions that allow you to save even more. Suppose you’ve diligently saved in your employer’s plan for the last 18 years. If you ratcheted up your contribution to the annual max, let’s see what might happen.

Save the max and score!

The following is for hypothetical illustration only and is not intended to imply the performance of any specific investment. Taxes are paid upon withdrawal.

Total Savings Today	Plus Contributions of...	Can Be This
$200,000         +	$1,083.33 / month	$262,271 in 2 years
$200,000         +	$1,083.33 / month	$336,178 in 4 years
$200,000         +	$1,083.33 / month	$422,395 in 6 years

Assumes total annual contributions of $13,000 at 8% interest. Dollar-cost averaging, a systematic investment plan, does not ensure a profit or guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels. Source for calculation: "Compounding with Monthly Contributions" calculator at interest.com.

Saving more helps you other ways, too. It can reduce the amount of income tax you pay at the end of the year … because your contributions come out of your pay before tax is figured. And, when you save at least up to the maximum your employer matches (if any), you take full advantage of this “free money.”

So, what's your situation? Saving more may be an option if your children have already left home, if you've recently reduced big debts (such as a mortgage, or charge cards), or if you have a spouse who can go back to work.

“Already maxed out your employer-sponsored plan?” Depending on certain income limits, you may be able to invest more tax-deferred in an IRA, Roth IRA or annuity.