Saving for retirement is critical. Unfortunately, too many people put it off. Nearly half of all older Americans have no money saved for retirement. With no retirement savings, you’ll have very little to rely on once you stop working. That’s why it’s so important to save and plan for retirement throughout your lifetime.
Fortunately, it’s never too late to start saving for retirement. Even if you’ve been working to save, you can benefit from tips and tricks that might help you put away more money. Saving for retirement might not be easy, but there are ways to maximize the money you’re setting aside.
Here are four tips that’ll help you save money for your retirement.
1. Start Saving a Small Amount Each Month Right Now
No matter how old you are, you can start saving a little bit for retirement right now. You can put aside a few dollars or a few hundred dollars, and begin growing your retirement savings account with a little effort.
Regardless of your income, it’s important to save a small amount of money each month. Even if you’re just saving $25, putting that money into a retirement investment account can begin generating earning through compound interest. Those earnings can then be reinvested, which helps you generate even more interest and earnings.
The sooner you start saving small amounts and investing that money, the more you can earn over the long run. For example, a 25-year-old who invests $75 per month can accumulate as much as $263,571 by age 65. Although waiting 10 years to start will lessen your savings, it’ll still be significant. For example, if you invest $100 a month by age 65, you can accumulate as much as $150,030.
While a small amount of money each month might not seem like a lot, it can make a huge difference in the long run. Start allocating a little bit of money for retirement, invest it in a retirement savings account, and watch it grow.
2. Contribute to Your Employer’s Retirement Savings Plan
If your company offers a retirement savings plan like a 401(k), you need to take advantage of that option. Make sure you sign up for your company’s plan and set a contribution amount.
There’s a significant benefit to contributing to an employer-sponsored retirement savings plan. You’ll pay less in taxes, as every dollar you contribute to your retirement savings is taken out of your gross income (or your overall, pre-tax earnings total). You can set up an automatic deduction from each paycheck, which will ensure you’re contributing to your retirement savings twice every month.
Additionally, putting aside a portion of your income into an employer retirement savings account can help you grow your savings over time. With compound interest, the ability to choose your investment risk, and tax deferrals, you can accumulate a significant amount of savings.
3. Take Advantage of Your Employer’s 401(k) Match
In addition to contributing to your employer-sponsored retirement savings account, you’ll want to take advantage of any matching the company offers. Many employers that offer 401(k) accounts match a certain percentage of their employees’ contributions.
For example, an employer might offer to match 50 percent of employee contributions up to five percent of your salary. Or, they might offer to match your contribution from each paycheck, up to five percent. This means that every contribution you make to your 401(k) is significantly higher. If you earn $50,000 a year and contribute $2,500 to your retirement plan, you’ll get an extra $1,250 in savings from your employer.
If you don’t take advantage of this match, you’re letting free money go to waste. So, make sure you’re maximizing any matching contributions offered by your employer. If they’re willing to match you up to a certain percentage or amount, set your contributions to take full advantage of that free money.
4. Use a Health Saving Account (HSA)
Did you know that your health savings account can actually help you plan and save for retirement? It’s not a well-known fact, but you can use your HSA as a tool for both healthcare expenses and retirement savings.
Here’s how it works. You contribute a set amount of money to your HSA each year – up to $3,550 for an individual or $7,100 for a family. You can use the funds for any medical expenses that pop up. However, if you don’t use all of your money within the HSA, you can actually invest the leftover funds. Once you reach age 65 or older, you can pull out the funds within your HSA for anything – meaning they can be used for retirement.
Make sure you’re maximizing your HSA each year. Contribute the maximum amount, which will lower your tax burden, and hang onto leftover funds. Those funds could easily become part of your retirement savings as you get older.
Start Saving for Retirement Today
Saving money for retirement sounds difficult. Well, it can be, especially if you’re working hard to make ends meet. However, with knowledge of different ways to maximize the money you’re putting away, you can grow your savings with little effort. All you have to do is start saving money today.
Follow these tips to begin building a retirement savings account. To maximize your money and its potential growth, you can work with a financial expert or advisor. You can also search online to stay informed about the latest tips and tricks about saving money for retirement. Strategies and savings opportunities can change – so make sure you know what the best ways to save money for retirement are.