5 Simple Ways to Boost Your Retirement Savings in the Next Week
Retirement planning can easily become overwhelming, even if you’re able to save routinely. Some people choose to put it off because they don’t know where to begin, but this only makes their job harder. A better approach is to break the complex task of retirement planning into simpler steps and tackle them one at a time.
Here are a few steps you can take right now to improve your retirement readiness within a week or two.
1. Rethink your budget
Saving more money for retirement might be as simple as redoing your monthly budget. Go back through your bank and credit card statements for the past several months and look for areas where you could reduce your spending. This could mean cooking more instead of dining out or canceling an old gym membership you’re not using. Put this extra money toward your retirement savings instead.
2. Go for your 401(k) match
If your company offers a 401(k) match, you should do your best to claim the whole thing every year. This is essentially a bonus, but you only get it if you put money toward your retirement yourself. It could be worth hundreds or thousands of dollars today and potentially tens of thousands of dollars or more by the time you retire.
Talk with your company’s HR department if you’re not sure how its 401(k) match works. Figure out how much you have to contribute to get the full match and compare that to what you’re already contributing. If possible, boost your contributions a little so you can take advantage of the full match.
3. Open an IRA
Consider opening an IRA if you don’t have access to a 401(k), you’ve maxed yours out, or you don’t believe it’s a good fit for you. IRAs have lower contribution limits — just $6,000 in 2021, or $7,000 for adults 50+, compared to $19,500 for 401(k)s, or $26,000 for adults 50+ — but they also offer a larger selection of investment options. Plus, you can choose whether you want to pay taxes on your contributions in exchange for tax-free withdrawals later or enjoy a tax break today and pay taxes on your distributions in retirement.
You can open an IRA with any broker and choose from a nearly endless variety of stocks, bonds, mutual funds, exchange-traded funds (ETFs), and more. This makes it easier to find investments that align with your long-term goals, and this can help you reach your savings target faster.
4. Ditch costly investments
All investments carry fees, but some charge more than others. You want to keep these costs to a minimum so you can hold on to more of your profits. It’s up to you to decide what fees you’re comfortable with, but ideally, you’d try to pay less than 1% of your assets in fees every year.
Index funds are a great choice for those trying to keep costs low while still earning a strong return. These are mutual funds or ETFs that mimic a market index, like the S&P 500. While these indices report losses in some years, their average annual returns tend to be pretty good over the long term.
5. Automate your contributions
Automating your retirement contributions ensures you don’t forget to make them. It can also help reduce emotional investing decisions because you won’t have to look at how your investments are doing every time you’re ready to add more money to your account.
If you have a 401(k), you should be able to defer a percentage of each paycheck or a set dollar amount every pay period. Most IRAs enable you to link to a bank account so you can automatically transfer funds each month. You’re free to change your contribution amount or schedule at any time, so you can adjust it as your circumstances change.
None of these changes are going to make you a millionaire overnight, but they can help you establish good financial habits that will make reaching your retirement goals much easier. Once you’ve got a system down, continue to make regular contributions and review your retirement plan at least once per year. See if you can identify any new opportunities to increase your savings.
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