Whether retirement is on the horizon or 30 years down the road, it’s never too early or too late to start saving. A recent study has shown that, on average, Americans have saved $98,800 for retirement, but 43% of people believe they may outlive their retirement nest egg.
If you’re concerned about not having enough money later in life, here are 5 ways to save money before you retire and ensure you have a nest egg for your non-working years.
The more time between today and your anticipated retirement date, the better. That’s because compound interest can help your investments grow over time. And the younger you are when you start to save, the less you’ll need to contribute each month to have a comparable retirement savings to those who start later in life.
Take Advantage of an Employer Match
During working years, some employers incentivize employees to save money for retirement by matching retirement plan contributions up to a certain amount. If your employer offers a match, be sure to contribute however much is needed to get the whole match.
For example, if your employer matches 100% up to 3%, then 50% up to 5%, you’d need to contribute 5% to get the full match. Failure to do so is like letting money slip out of your hands.
Leverage Catch-up Contributions if Eligible
If you’re 50 or over, some retirement accounts allow you to sock away extra funds in what’s called a catch-up contribution. In 2022, eligible participants 50 or over can put away an additional $6,500 into a 401(k), 401(b), or 457, and $1,000 into a traditional or Roth IRA. These catch-ups are intended to help those closer to retirement increase their savings more quickly.
Think Beyond Retirement Accounts
Employer-sponsored retirement accounts and IRAs are great. But other options like taxable brokerage accounts or whole life insurance allow savings that can help serve another purpose in retirement. For example, whole life insurance and other kinds of permanent life insurance have a cash value component that can be tapped during the policyholder’s lifetime and used to supplement retirement savings or Social Security benefits.
Put Windfalls to Use
While your income tends to be fairly predictable, there are unexpected ways to have an influx of cash. Whether it’s a bonus, gift, or inheritance, try to reign in the desire to splurge on something extravagant, like a family vacation to the Bahamas. Instead, dedicate at least half of what you receive to retirement savings in some capacity. Then, you can use what’s left over to fund other savings goals or treat yourself.
The Bottom Line
Retirement is coming for us all, as long as we plan for it. That’s why it’s important to push retirement savings at any age, even though the actual days of relaxation may seem far off. By starting now, getting the employer match, leveraging catch-up contributions, using non-retirement accounts, and putting windfalls to use, you’re setting yourself up for a much more stable and well-funded retirement.
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