What does “retirement” mean to you?
For some, it may mean years of vacationing in your condo in Florida, surrounded by warm weather and playing cards. For others, it means getting more time to spend with grandkids and other family members. Others may see retirement as a chance to do work they are particularly passionate about. They might serve more in the community or be part of a non-profit board.
The age at which you retire is also up to you as well.
Whatever retirement looks like for you, it’s often a time to look forward to. But however you anticipate spending your years of retirement, you’re going to need some savings.
With resources like social security in jeopardy, having your own allocation of savings is essential if you plan on retiring at a reasonable age. To have the retirement you want, you’ll need to do some planning.
Growing up, you may have heard the importance of saving for retirement. Your employer probably has a dedicated 401(k) or another plan that helps you save money for retirement without needing to account for taxes right away.
Whether you’re 22 or 42, it’s never too early or late to start saving for retirement. The best time to start your savings plan is now.
But a concern of many is that saving for retirement seems like too large of a task to handle. After all, you’re thinking about paying for your living expenses for years. As you navigate how much you’ll need and what retired life will look like for you, there are some easy and effective steps you can take to start saving for retirement. These steps you can take in whatever stage of life or in your career you’re at. While the strategic direction you take may depend on your age and how close you are to retirement, you can find a way to pursue your savings, your way.
12 Easy Ways to Save Money for Retirement
To help you get started in growing your confidence in retirement, here we share 12 easy ways you can save money for retirement, starting right now.
1. Let Compound Interest Work To Your Advantage
Particularly if you’re at a young age, putting money away now carries the value of time. With compounding interest, the longer you can have money in an investment, the greater impact that amount can have as it accumulates with interest. Compound interest works by reinvesting your earnings along with your principle. This, in turn, allows you to earn more on a greater investment amount. With this compounding, you can dramatically increase your savings over time.
Regardless if you can start putting away $50 or $100, the difference you can have in using time to your advantage can be profound as you save for retirement. If you’re young and can only afford to put away a small amount, for now, anything is better than nothing.
2. Contribute More to Your 401(k)
If your employment situation includes a 401(k) plan, maximize your potential for earnings by contributing more to the account. Growing this account helps to grow your savings over time and follows you along with your career.
Particularly, if your employer has a plan in place that’s designed to match your contributions to your 401(k), utilize that account to its full potential. Meet that percentage match that your employer provides. This contribution from your employer can help you grow your savings significantly overtime if done consistently.
When it comes to taxes, it’s important to know what kind of 401(k) plan your employer offers. A traditional 401(k) allows you to accumulate pre-tax money. This money is only taxed when you take it out. A Roth 401(k) plan, on the other hand, is earnings after taxes. If given the choice, your decision between a traditional or a Roth 401(k) plan should be considered in the context of what your anticipated tax bracket would be once you hit retirement.
3. Open Your Own With an IRA
In addition to supporting your retirement through your employer, you can also open up an individual retirement account (IRA). Like a 401(k) account, you also have the choice between a Traditional IRA and a Roth IRA. Again, the decision between these two types comes down to where you sit in the tax brackets. You’ll also want to consider tax-deductibility and other benefits of choosing either pre-tax or post-tax options. If you choose a Roth IRA, you won’t need to take out taxes when you take the money out, giving you greater assurance in your retirement years.
Because IRAs are coming from your own financial account, be sure this step is secondary to supporting your employer-sponsored 401(k) account. You’ll also want to do your own research into what type of investment you want to engage in prior to making regular contributions to your account.
4. Make Your Contributions Automatic
Making contributions to your account becomes easier when you don’t need to think about losing that money from their paychecks. When you choose to automate your savings by putting them directly into your account, you notice that reduced amount less. Not only does this automated contribution set-up make it easy to add the contributions you want, it also removes the burden of having to manually transfer money each month.
Chances are, your 401(k) is set-up automatically from your employer. You can also do the same with your IRA account by choosing what funds to add to, how much and on what day of the quarter or month.
5. Add-In Your Budget Surplus
If you get to the end of the month and realize you have some extra cash you’re not sure what to do with, save it. If you can and no other pressing financial concerns arise, use at least part of that excess cash to make an extra contribution to your retirement savings. Whether it’s a large sum or just a little bit, adding that extra in with your compounding amount can quickly add up over time.
6. Make it a Priority
Especially if you’re young, you may think you’ve got plenty of time to save for retirement when you’re older. But the best time to start saving for retirement is when you’re young. This allows decades of compounding interest to work to your advantage. While there are always expenses that come up that deserve intentional focus, keep retirement toward the top of your priority list. You’ll be glad you did when you see your money grow exponentially.
7. Track Where Your Savings are At
While it’s often easier to automate your savings and just let them run, remember to keep an eye on your investments and savings accounts. Know when changes might need to be made and if you need to make any additions or reductions in your accounts in order to best maximize your savings potential.
8. Use Your HSA
If you have a Health Savings Account (HSA) you can use that money tax-free for your deductibles and medical expenses. When you reach that milestone of 65 years old, that money is still yours. You can use that as you would a traditional IRA in paying taxes when you take the money out for anything you want.
9. Cut Your Expenses Today
If you stick to your budget, you may be able to find areas and categories you may be able to cut some of your expenses in order to contribute more to your retirement savings. Particularly if you’re well along in your career and closer to reaching that retirement spot, prioritize those account savings. While it may be inconvenient at the moment to take your own lunch to work or pass up on that new dress, you’ll be glad you saved for retirement when you need it.
10. Take Advantage of Your Bonuses and Raises
If your company distributes annual bonuses, direct that money toward your retirement savings. If your lifestyle allows and you can, use that raise you receive to fuel your retirement savings. While this may not be necessary when you’re younger, doing so in your later career years can significantly improve your financial outlook when in retirement.
11. Eliminate Debts
Don’t enter retirement with past credit card debt or car payments hanging over your head. Before diving into retirement, be sure all your debt is paid off. You won’t want to be using your retirement savings for debt repayment. Use your savings instead to enjoy your years of retirement as you spend them how you wish.
12. Keep Your Goal In Mind
With so many expenses arising each month, it can be easy to get distracted from your retirement savings. Aside from financial emergencies, saving for retirement should be placed at a high priority in your budget creation. Calculate your savings goal for retirement and keep that number in mind as you make your regular contributions that will make a big difference in your financial future.
Start Saving For Retirement Today
Today’s a great day to start saving for retirement. Get started or amp up your savings plan with these 12 easy ways to grow your nest egg. When you’re relaxing on the beach or spending all that time with grandkids, you’ll be glad you started saving early.