Long-term Focus & the 2% Difference

Chart of the Week for May 19-26, 2006

It was a rough week for stocks and bonds as inflation concerns renewed fears that the Fed will continue to raise interest rates. During periods of market fluctuations such as this, it’s important to keep a long-term focus for retirement planning. Increasing the amount you contribute to your retirement account is a proactive way to progress toward your retirement goals. Thanks to compounding, even raising your contribution by as little as two percent can make a significant difference over time.

Assume an annual salary of $40,000, monthly contributions and an average annual return of eight percent. If, over a 40 year period, you contribute six percent of your salary, you will have invested $96,000 and have an ending balance of over $650,000. If you contribute just two percent more or eight percent, you will have invested $128,000 resulting in an ending balance in excess of $860,000. A ten percent contribution adds up to a total investment of $160,000 and an ending balance of over $1,000,000.

In this example, increasing your contribution amount by two percent costs an additional $32,000 (over 40 years), but increases the ending balance by over $200,000.

Raising your contribution is a great way to help yourself in the long-run, regardless of what the market does in the short-run.

This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.

Investment information can change rapidly and the changes can be significant particularly in volatile markets. For this reason “as of”’ dates are provided for specific data where applicable. The information should not be considered current after the dates provided.

Please read both the current applicable prospectus and MAKING SOUND INVESTMENT DECISIONS: A Retirement Investment Guide carefully for a complete summary of all fees, expenses, charges, financial highlights, investment objectives, risks and performance information. Investing in mutual funds and other investment vehicles involves risk, including possible loss of the amount invested. Investors should carefully consider the Fund's investment objectives, risks, charges and expenses before investing or sending money. The prospectus contains this and other information about the investment company. The Vantagepoint Funds are distributed by ICMA-RC Services LLC, a wholly owned broker-dealer subsidiary of ICMA-RC and member FINRA/SIPC. For a current prospectus, contact ICMA-RC Services, LLC.

The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.