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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 challenging. 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 rent, supporting a family, saving for college expenses 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 Economic Policy Institute, nearly half of American families have no retirement account savings at all, and more than half of pre-retirees (57%) expect to have a more difficult time saving for retirement than their parents or grandparents did.
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 saved 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 provide the opportunity to boost your savings.
Getting a raise
Perhaps your hard work has been rewarded with a raise. Now it’s time to think about using this money to then reward your future self. As you’ve already been living on a lower salary, you could continue that 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 retirement.
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, you’re likely to realize savings once you’re no longer paying for daycare 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 childcare 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 a job at a new company is a great time to rededicate yourself to saving, especially if your new position comes with a higher salary. Many companies automatically enroll their employees into a retirement savings plan, but usually at much too low of a savings level. Challenge yourself to contribute a few percentage points more at your new job than you did in your last one. You could make it a goal to ensure you contribute at least enough to take full advantage of the company match, if there is one.
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 contribution limits exist on 401(k)s and 403(b)s, you can invest more per year after you turn 50. You can also put away extra money for IRAs. The increases will add up, as you could still have more than a decade to contribute. Visit the IRS website Opens in new window for the latest information 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, car insurance payments, or your child’s cell phone charges. Household expenses including food bills may have also decreased.
If you crank up your retirement savings at this time, you may not even feel it in your day to day life, given what a big bite children can take out of the family budget.
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 some adult children are still living 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 human resources department how to have more money moved from your paycheck to your nest egg.
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.
*Amounts are for 2018 and are indexed for inflation.
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