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Actions 5 Ways to Boost Your Retirement Savings
Key Takeaways
- Use an income hike at work to score bonus bucks for your future.
- Hit the big 5-0? Play catch-up if you can.
- Kids flown the nest? Recharge your savings plan.
No doubt about it, saving for retirement is a challenge. Even if you’ve emerged from the COVID-19 pandemic financially unscathed, it’s hard to eke out the extra dollars for such a long-term goal. This is especially true because there are so many immediate demands on your money, such as housing, supporting a family, saving for college and possibly dealing with debt.
It’s no wonder that, for many people, saving for retirement is an afterthought. And it shows. According to the Federal Reserve Opens in new window, nearly half of American adults under 30 have no retirement savings at all. And even though more than eight in 10 of those age 45 and older have something set aside for their future, most don’t think they’re on track to reach their goals.
Many financial professionals suggest saving around 15% of your pay if you want to replace 70% of your final working income in retirement. Saving at this rate may sound daunting. So how can you get there?
First, understand that any amount you save for the future is better than no savings at all. Even small amounts will grow and compound over the years. Then, consider key life events that might provide a good opportunity to boost your savings. Here are some milestones that may qualify.
Getting a raise
Perhaps your hard work has been rewarded with a bump in pay. Now it’s time to think about using this money to reward your future self. As you’ve already been living on a lower salary, you could continue your current lifestyle and direct the extra amount in your paycheck toward retirement savings. You could also choose to keep half the extra income from your raise and put the other half into retirement savings. That way you’ll feel a bit of a bump up in your lifestyle while still saving for tomorrow.
A child starting kindergarten
After you’ve shed a few tears because your baby is growing up too fast, take a look at your monthly budget, as this may help you feel better. If your child is going off to a public school (in person or on screen), you’re likely to realize savings once you’re no longer paying for day care or preschool (some states do offer free pre-kindergarten programs). Because you’re already used to taking that chunk out for educational expenses, setting aside even half the amount you paid for child care shouldn’t feel too onerous.
A new job
Landing a new job can be the perfect opportunity for a fresh start, in numerous ways. Starting work at a new company is a great time to rededicate yourself to saving, especially if your new position comes with a higher salary. Many organizations automatically enroll their employees in a retirement savings plan, but often at much too low a savings level. Challenge yourself to contribute a few percentage points more at your new job than you did in your last one. And no matter what, if your employer offers a match, make sure you contribute at least enough to take advantage of every penny.
Turning 50
Don’t despair when the unrequested AARP membership shows up in your mailbox. Hitting the half-century mark is cause for celebration—at least where retirement saving is concerned.
Here’s why: While annual contribution limits exist on 401(k)s, 403(b)s and 457s, you can invest more starting the year you turn 50. You can also put away extra money for IRAs. These “catch-up” increases will add up, as you could still have more than a decade to contribute before you retire. Visit the IRS website Opens in new window for the latest on contribution limits.
Becoming an empty-nester
Depending on how old you were when you started a family, you might have a few years to turbocharge your savings after the kids finally fly from the nest. You may no longer be footing college tuition bills, extra car insurance payments or your child’s cellphone charges. Household expenses, including food bills, may also be lower. In fact, if you crank up your retirement savings now, you may not even feel it in your day-to-day life.
It’s worth noting that families will have differing timelines for when they can take advantage of an empty nest, as more people have delayed childrearing and many adult children still live at home.
What you can do next
Identify important life events in the next five to 10 years that may be good opportunities to increase your retirement savings. Find out from your company’s benefits department how to move more money from your paycheck to your nest egg—and make increases automatic.
Footnotes
Ilana Polyak is a freelance writer who specializes in personal finance and the financial advisory industry. Her work has appeared in The New York Times, Barron's, Kiplinger's Personal Finance, Bloomberg BusinessWeek and CNBC.com.
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