Feeling pressure to save more for retirement? You’re not alone. According to a study from Gallup, more than half of Americans are worried that they won’t have enough money to fund their retirement. In fact, Gallup has conducted a study on Americans’ top financial worries every year since 2000, and retirement has always been cited as the top concern.1
According to a separate study from the Economic Policy Institute, there’s good reason for the widespread concern about retirement. The study found that half of Americans have no retirement savings. The average savings balance is just over $95,000, but the median balance is only $5,000.2
It’s possible to catch up on your retirement savings efforts, but you may need to act quickly. Fortunately, there are a number of different strategies you can implement. You can delay your retirement age, giving yourself more opportunity to save. You can scale back your retirement plans, reducing your anticipated spending. You could even work part time in retirement.
However, the most effective step may be simply to save more money each year. The more money you contribute to your 401(k) or IRA, the more you have to invest. That leads to greater compounded growth and significantly more money when you retire. Having trouble saving more? Below are a few tips to help you increase your savings:
Take advantage of the employer match.
Does your employer offer a matching 401(k) contribution? If so, that match could be the key to substantially increasing or perhaps even doubling your savings rate. Many employers offer matching contributions as a benefit and to help their employees save for retirement. For example, an employer may match contributions up to a certain threshold, such as 3 percent of salary.
You can take advantage of this benefit by contributing enough to get the full employer match. For example, if your employer matches up to 3 percent and you contribute that amount, your contribution plus the employer’s totals a 6 percent contribution. The employer match can be a powerful tool to help you save.
Don’t limit yourself to your 401(k).
A 401(k) is a powerful savings vehicle, but it’s not the only tool at your disposal. You also may want to consider contributing to an IRA. You can contribute as much as $5,500 in an IRA in 2018, above and beyond what you contribute to your 401(k).3
There are several different IRA options. A traditional IRA allows you to potentially deduct your contributions on your current-year taxes and grow your money tax-deferred while it’s in the account. However, distributions from the account are taxable. A Roth IRA offers tax-free distributions in retirement and tax-deferred growth, but no upfront deductions today for contributions. A financial professional can help you decide which type is right for you.
Maximize catch-up contributions.
If you’re age 50 or older, you can make additional contributions to your 401(k) and IRA. These additional amounts are known as catch-up contributions, and they’re designed to help those who are approaching retirement save more money.
In 2018 the normal contribution limit is $18,500 for your 401(k). If you are age 50 or older, however, you can contribute an additional $6,000, for a total contribution of $24,500. The normal IRA limit is $5,500, but those age 50 or older can contribute an additional $1,000, for a total allowable contribution of $6,500.3
Put your contributions on autopilot.
One of the biggest challenges many people have with saving is the problem of choice. Given the choice between saving for the future and paying for a more immediate expense, many will choose the immediate expense. They justify this choice by believing they still have plenty of time to save for the future.
You can eliminate this problem by automating your contributions. Your 401(k) contributions are automatically deducted from your paycheck, so it’s easy to set those savings on autopilot. However, you also may be able to set up automatic IRA contributions from your bank account or even your paycheck. If you make your savings automatic, it may be easier to save more money.
Ready to boost your savings? Let’s talk about it. Contact us today at Gregory Financial Group. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
17188 - 2017/12/12