No matter where you are in your life, saving for retirement is likely one of your most important financial goals. But, even if you have professional guidance and a clear strategy for your desired future, you could still be missing some straightforward ways to maximize your savings.
The reality is: Most people do not save enough money for retirement. In fact, the National Institute on Retirement Security estimates that Americans have at least a $6.8 trillion gap between the amount they have saved and the amount they need. Alarmingly, they found the gap could be as high as $14 trillion.
We are always here to help you address major life events and financial changes, but we also want to share some simple ways to increase your savings now.
Reevaluate Small Budget Items
Changing major aspects of your budget — such as your housing or healthcare costs — can significantly impact your savings potential, but may also take time to implement. To start saving more today, look at the little places where you spend money and see where you can trim your expenses. For example, do you eat lunch out every day or throw extra things in your cart during shopping trips? Do you have entertainment packages you aren’t really using, such as cable TV or online memberships? Saving a few dollars each day can add up to thousands of dollars over a year, which is money you can put toward your retirement.
One way a Searcy team member does this is by ordering groceries online. By making a list and only putting those items into an online shopping basket, it can help reduce impulse purchases and really help out with budgeting. Her family also found they were only using the streaming portion of their Netflix subscription but still paid for the monthly DVD service. Removing that DVD component was small, but small savings can add up to make a big impact.
Remember to Imagine the Retirement You Desire
Effective retirement strategies often focus on building a clear vision of how you would like to spend life after your career. As you go about your daily life and make financial decisions, how often do you reflect on this vision? Rather than only thinking about your retirement goals during financial reviews or major choices, start incorporating this picture into your regular decision-making process. For example, each time you make a purchase, ask yourself if you’d rather have this item or put the money toward the retirement you desire. You may discover that by grounding each purchase in this way, you spend less on items you don’t really care about — and have more money to put toward the retirement you’ve dreamed about.
If waiting to complete your career to retire doesn’t sound like the life you imagined, check out Marc Shaffer’s blog post “Thinking Differently About Retirement.” Just because we’re talking about saving for retirement doesn’t mean that retirement has to be some far off dream.
Capture Your Employer’s Full 401(k) Match
U.S. employees lose $24 billion a year by not saving enough in their 401(k) to claim their company’s full matching contribution. Many companies require a minimum contribution from the employee in order to earn the full employer match. If your employer matches a portion of your retirement contributions, make sure you contribute at least enough to claim what is essentially free money. And if you are age 50 or older, remember that for 2017 you can contribute an extra $6000 each year to your 401(k) on top of the $18,000 annual limit.
Jessica Searcy-Maldonado suggests another way to help save more in your 401(k) is to increase your savings amount by 1-2% every time you get an increase in compensation. This could be during your annual review, promotion, or any other time you see an increase in your income. By making the savings increase at the same time, you are less likely to “feel” it because you don’t become accustomed to living on a larger paycheck before making a change.
Invest Additional Funds
When you receive unexpected money such as a bonus, tax refund, inheritance, or other financial windfall, spending the funds can be very tempting. Instead, if you choose to invest this money into your retirement, you can boost your savings without affecting your current bottom line. In addition, if you put a bonus into a 401(k) or IRA, you may also enjoy tax benefits and not owe anything until you withdraw the funds.
For more information on managing unexpected money, check out these posts:
- What Do I Do with This Cash?
- How Does an Inheritance Change Your Financial Picture?
- Treat All Money as Equal
Saving for retirement is a big responsibility, but it does not have to be a burden. With these simple changes — and support from professionals who care about your future — you can focus on creating a lifestyle that matches your dreams. We are here to help you at each step, so please let us know if you have any questions about these tips or the bigger strategies guiding your retirement.
Sources:
https://www.fool.com/retirement/2017/01/01/12-jaw-dropping-stats-about-retirement.aspx