You’re probably well aware that it’s important to save for your retirement. For most of us, the days of 100% employer funded pensions are long gone, and Social Security is only designed to offset a portion of your pre-retirement income.
Most financial advisors recommend that workers save enough to cover 75 to 85 percent of their annual pre-retirement income. With stagnant incomes and the rising cost of expenses such as healthcare, food, and housing, it’s challenging for most of us to save for retirement!
Luckily, you can boost your retirement savings, regardless of your age, or how strained your existing budget might be.
Use these steps to increase your retirement savings and secure your financial future:
1. Save now. If you aren’t already contributing to a 401(k) or other employer defined retirement plan, start now.
- If traditional contributions of 10% of your income are too much to handle, start small. Try saving just 1 to 2 percent of your gross income. Boost your savings each year by increasing your contribution rate to match the amount of your annual raise.
- You have a 100% instant return on your investment when your employer matches a percentage of your 401(k) contribution. When you enroll in your employer’s plan, contribute at least the minimum to qualify for any match offered by your employer.
- Open a traditional or Roth IRA if your employer doesn’t offer a 401(k) plan. Traditional IRAs can help you lower your annual tax bill, which can free up hundreds of additional dollars to increase your retirement savings. Resist the urge to spend your savings!
2. Work longer and retire later. Delaying retirement will boost the amount of your social security benefits and give your savings extra time to grow.
- Early retirees see a permanent reduction of 20% of their estimated benefits. By delaying retirement, you’ll draw a larger benefit amount from Social Security and shorten the length of time that you’ll need to draw upon your retirement savings.
- As you approach retirement age, look for ways to create additional income streams that are separate from your primary occupation, such as freelancing or starting a small business. Increasing your revenue streams frees up more funds that you can use to bolster your retirement savings.
3. Get out of debt before you retire. Debt payments often comprise a large portion of most budgets. Debt also eats up funds that you could use for retirement savings.
- Create a realistic, workable budget that eliminates your debt over a specific time frame.
- Aim to be out of debt before you retire so that you need to save less for your retirement.
- As you decrease your debt, the challenge is to remain disciplined, rather than going into debt again or wasting your retirement savings on other expenses.
4. Downsize before retirement. As you create a budget, take a hard look at how much your home is costing you. Is it time to consider downsizing to a smaller place with lower costs?
- Many of us relocate during retirement for a warmer climate or to be closer to children and grandchildren. Consider selecting a smaller home with lower costs for operation and upkeep if you move.
- You can downsize more than just your home. Sell off unused items and use the proceeds to boost your retirement savings.
Finding ways to save money for your later years can be a difficult and time consuming chore. However, following these tips makes it easier to increase the amount of money you save for retirement.
