A a lack of retirement savings is a serious problem for millions of Americans with nearly seven in 10 worrying they won’t have enough savings for years to come.
Unfortunately, while many people want to save more, doing so can be difficult. That’s because it’s hard to sustain sacrifices throughout your life to increase your retirement investment.
The good news is, there are ways to save more without affecting your lifestyle. Here are four of them.
Image source: Getty Images.
1. Take advantage of employer-matched funds
If you have a 401(k) company that offers matched contributions, taking advantage of it is the easiest way to increase your retirement savings without major lifestyle changes. After all, your employer is giving you extra money.
Of course, you have to make a contribution to match, and you should always aim to invest enough to earn the full amount. If your employer matches 50% of contributions to 4% of your paycheck, and you make $60,000, you should contribute $4,800 — but in doing so, you’ll get another $2,400 for free. That’s a lot of extra cash with no sacrifice on your part.
2. Claim all your tax breaks
You can also get free money from Uncle Sam to easily increase your retirement savings.
Investing in a tax-advantaged account such as a 401(k), IRA, or HSA allows you to reduce your dues costs and set aside more money without seeing a large drop in take-home pay. If you contribute $1,000 and are in the 22% tax bracket, you will only be charged $780.
If you qualify, you can also claim a Saver Credit, which is worth up to $2,000 for married co-reporters or up to $1,000 for single-plainers. The Savings Credit gives you a tax credit equivalent to 10%, 20%, or 50% of retirement contributions up to $2,000 for singles or $4,000 for married co-filers (the specific amount depends on your income).
Tax credits reduce your tax bill on a dollar-by-dollar basis. If you supposedly owe $2,000 in taxes and can claim a $1,000 Saver Credit, your bill drops to $1,000. That makes it easier to save more for retirement without major lifestyle changes.
3. Invest your windfall
Throughout the year, you will most likely earn at least some money outside of your regular salary. This could be from a bonus at work, a tax refund, or a cash gift, for example. When cash comes in that you don’t expect, put it straight into a retirement account.
This is a little more difficult to do if you are investing in a 401(k) because you will have to have contributions taken from your paycheck. But if you have access to an IRA, you can easily move money into it as soon as the funds come to you.
4. Save your raise
Finally, when you get a raise, transfer the entire amount directly to your retirement savings. If you do this before you get a bigger salary, you won’t need to make any lifestyle changes, because you’re used to living with what you’re earning now.
Taking these steps can potentially help you add thousands of extra dollars to your retirement account over time. And the good news is, you don’t have to add a lot of savings to make a big impact. In fact, even the extra $1,000 invested over your career can add more than $320,000 to your nest egg.
Start with these steps as much as you can today, so you can add to your retirement savings without major lifestyle changes.
The $16,728 Social Security bonus that most retirees completely ignore
If you’re like most Americans, you’re a few years (or more) behind in your retirement savings. But some little-known “Social Security secrets” can help ensure an increase in your retirement income. For example: one easy trick can pay you as much as $16,728 more… every year! Once you learn how to maximize your Social Security benefits, we think you can retire confidently with the peace of mind we all seek. Just click here to find out how to learn more about this strategy.
Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.