How to Easily Boost Retirement Savings This Year
The best way to easily boost retirement savings this year is to maximize your contribution limits.
However, for many Americans, this isn’t always an option due to credit card debt, student loans, cost of living, and other financial obligations.
The good news is you can save more for retirement without struggling or eating Ramen.
Keep reading for 7 ways you can contribute more money to your retirement savings–without breaking the bank.
#1 Save 1 to 2% More This Year
Saving 1 – 2% more year over year may make more of a difference to your retirement savings than you might think.
If you earn $60,000 a year and you saved 1% more of your salary, that’s only $50 extra a month, or $600 a year, you could set aside for retirement.
If you saved 2% of your $60,000 salary, you’d save an additional $1,200 a year, or $100 per month.
The 1 – 2% should be in addition to the percentage you saved last year.
#2 Cut One or Two Expenses
Another way to easily boost retirement savings this year is to cut back on one or two expenses and apply the money saved to your retirement fund.
While it may not seem like much, cutting just one expense can add up over time and may make a big impact on your retirement nest egg.
For example, if you cut $90 out of your budget and instead contributed it to your retirement each month for 12 months, you would end up with $1,080 extra saved in a year’s time.
Let say you also cut back on a streaming service.
Instead of paying $50.99 each month, you drop your plan to $11.99. That’s a $39 monthly savings. Multiply that by 12 months, and you will save an additional $468 per year.
By cutting these two expenses from your budget, you could save an additional $1,548 a year toward retirement… and do so without significantly altering your lifestyle.
#3 Contribute Your Raise
Should you get a raise this year, designate the extra income for retirement savings and directly put it into your 401(k).
If you do this immediately when the raise takes effect, you won’t miss the extra money because you will never see it reflected in your bank account.
Even if you take a portion of the extra income and apply it to your retirement savings, you will still be saving more without reducing your take-home pay.
#4 Invest Your Tax Refund
Another way to easily boost retirement savings without reducing your take-home pay is to invest your tax refund.
The best part is, should you decide to invest your refund into your 401(k) or IRA, it won’t affect the amount of your take-home pay.
If you add to your 401(k), it needs to go through payroll deduction.
We recommend you contact your Human Resources department, tell them the amount you want to invest, and they will take it out of your paycheck(s). Then use your tax refund to live on and make up the difference during this time.
If you have a traditional or Roth IRA, you can use IRS Form 8888 and redirect your refund into your IRA. Or increase the amount automatically drafted from your bank account each month.
#5 Redirect Unexpected Cash
Should you receive an inheritance, a bonus, a ton of graduation money, or any other unexpected cash influx, set all or part of it aside for retirement.
Again, this is another way to easily boost retirement savings without cutting your budget or reducing the amount you can spend each month.
Avoiding the temptation to spend all or part of it now will pay off in the future.
#6 Side Hustle for Savings
If you can’t figure out how to save more this year for retirement without stretching yourself too thin, pick up a side hustle (or two) and save the money earned.
Driving for a rideshare service. Tutoring in the evenings. Renting out your house on the weekends.
If you have a 401(k), take the extra money earned and use that to live on, and then contribute more from your paycheck to your 401(k).
If you have an IRA, make regular contribution deposits with your side hustle income.
#7 Contribute at Least the 401(k) Company Match
Meeting the company match is one of the best ways to easily boost retirement savings this year.
If you have a 401(k), contribute at least the minimum of what your company will match because it’s basically FREE money to you.
Depending on what your company matches, it may double the amount of what you’re already saving.
Here’s the power in the company match…
Let’s say your company matches 100% up to 6% of your pay.
With a $55,000 salary, you could put in 6%, or $3,300 for the year, and the company would match this at 100%.
That’s another $3,300 per year of free money that’s yours to keep.
This extra $3,300 does not include compounding interest or your earnings.
This is just the additional money you could be saving with your company match.
Bonus Tip: Another Way to Potentially Increase Your Retirement Savings
While the 7 tips above will help you easily boost retirement savings this year, there is another way to potentially increase your retirement nest egg.
Studies show that working with a financial advisor may increase your retirement income and may greatly impact the type of retirement lifestyle you can afford.
In a 2019 study titled Advisor’s Alpha, The Vanguard Fund Group, Inc., reported a 3% average increase in the value of portfolios of clients who work with a good financial advisor.¹
This return, the study states, depends on the client’s situation and will vary from year to year.
Morningstar’s David Blanchet, Head of Retirement, CFP, CFA, published a 2014 study titled, The Impact of Expert Guidance on Participant Savings and Investment Behaviors.
The report revealed that participants who received expert guidance had as much as 40% more income during retirement versus those who received no help at all.²
If you don’t think you have enough saved to warrant seeking third-party expert advice, or you think it won’t make much difference, take a moment to ponder this:
What would your retirement lifestyle look like if you had 40% more income than planned?
Perhaps it might allow you to go on vacations instead of taking staycations.
It might also help ensure true retirement freedom, without the need for part-time work.
If you’ve been hesitant to reach out to a professional for help with your retirement savings, there’s no time like the present to take action.
Use our retirement calculator to see how professional help may improve your future retirement income.
Check out our no-cost guide on The Different Types of Licenses Financial Advisors Have and What They Mean to You .
Sources:
- https://www.investopedia.com/articles/personal-finance/102616/how-much-can-advisor-help-your-returns-how-about-3-worth.asp
- David Blanchet, Head of Retirement, CFP, CFA, Morningstar 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”
