How can I increase my retirement savings?
During retirement, we want to achieve financial freedom. This means having enough money to cover your expenses and live how you want without worrying about financial constraints. Retirement is a time in your life when you shouldn’t have to worry about your finances.
You’ve run the numbers. You’ve completed your calculations, and you’re coming up short.
Or perhaps, your expected savings will cover your planned expenditure, but you want to beef up your nest egg for some added security.
Fortunately, there are many ways you can boost your savings as you get closer to retirement:
1. Take advantage of catch-up contributions
The amount you can contribute to your retirement fund is capped yearly.
For example, in 2023, the personal contribution limit for your 401(k) is $22,500, $66,000, when you include your employer’s contribution. For your traditional and Roth IRAs, your total contributions for 2023 cannot exceed $6,500.
Once your 50th birthday comes around, this changes.
From age 50 onwards, you can increase the amount you contribute each year. In fact, you don’t even need to wait until the day you hit the golden number; you can start adding to your savings at any point during the calendar year you hit 50.
For your 401(k), you can contribute an additional $7,500. This brings the total you can contribute to your 401(k) in 2023 to $30,000. Likewise, if you have an IRA, you can contribute an additional $1,000, bringing your contribution limit for the year to $7,500.
While these contributions are designed to help those late to the retirement saving game, everyone can benefit.
So, whether you’re late to the savings game or just looking for an extra cushion, catch-up contributions are a powerful way to bulk up your savings accounts ahead of your exit from the workforce.
2. Redirect your “extra” money
Receiving some income you were not expecting is a huge thrill.
If you receive a bonus or raise in work or maybe you’ve won an amount of money, it can be easy to spend this frivolously in the excitement of it all. Instead, why not put this money to work in your retirement fund?
You will still get to enjoy your success, just a little later down the line when you can make the most of it.
The same can be said about diverting some of your spending.
Take your car loan or mortgage, for example. Once you reach pre-retirement age, these expenses are usually coming to an end or are finished completely. So why not redirect this money to your retirement fund? The money can grow in this account, ready for when needed. The added bonus, you’re already used to it leaving your account each month, so it won’t feel like a reduction to your daily income.
3. Diversify your investments
You never want to put all your eggs into the same basket. This advice is also true for investments; don’t put all your money into a single stock.
As you approach retirement and during your golden years, your investment portfolio should work hard to generate income. Therefore, it should be a mix of stocks, bonds, and mutual funds.
High-yield savings accounts are also an option here. These are federally insured savings products that earn higher rates than the national average. Using a high-yield savings account allows your money to grow faster over time compared to an average savings account.
Where you choose to invest will depend on what you’re comfortable with, specifically your attitude toward risk. While no investment can be made without risk, some are safer long-term bests than others.
4. Reevaluate your budget
It’s always a good idea to regularly review your financial plan – ideally with your financial advisor. How you save, budget, and invest is constantly evolving. How you plan your finances in your thirties is very different from how you’ll do it in your fifties.
Taking a look at your finances allows you to find areas for improvement.
It could be as simple as reducing your spending – maybe bringing lunch to work instead of buying it each day. Or perhaps you can increase your savings rate – if you’re now making more money, you can afford to contribute a higher percentage of your annual income to your retirement fund.
Making changes can also be a little more complex. For example, you may notice your health insurance premium is high, or you’re paying too much for rent and could afford to downsize. These changes involve a little more thought and planning before you can start seeing the benefits.
Another thing to ensure you do while reviewing your finances is to review your goals. Setting benchmarks along your retirement journey will help you reach your ultimate goal – whatever it may be.
Want guidance when it comes to your retirement planning? At Unbiased, we empower you to make confident financial choices, tell us what you need, and we’ll connect you to trusted, tailored, and timely advice.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.