If you’re like most people, chances are you started a retirement account through your employer or at the urging or your spouse at one point but haven’t paid too much attention to it since.
Yet the reality of outliving your retirement savings is a very real predicament for many Americans. Not having enough put aside in your retirement savings can mean living in relative poverty throughout your golden years, instead of enjoying all the things you wanted to do after retiring from the workplace.
Fortunately, there are some simple things you can do to boost your retirement savings. Here are some simple strategies you can use to start a growth spurt in your retirement savings account.
Start Early
If you’re only just beginning to think about your retirement savings, don’t delay any longer. Start contributing as much as you can comfortably afford into savings as early as you can.
Over time, the money you’ve saved will earn interest. As your savings grow, you’ll eventually be earning interest on the interest you’ve already earned. This is called ‘compound interest’ and it has the power to speed up your savings efforts. Starting early gives you the advantage of compound interest building up your savings much faster over a longer period of time.
Start Small
Even adding small contributions to your retirement savings account can have a huge impact on your final results. If you’re just starting to put money aside for retirement, begin by saving a small amount of money on a regular basis.
Even small amounts can add up to significant sums over a period of time. When you add the benefit of compounding to your savings efforts, you should find that your account is growing faster than you thought, even with just small amounts going in.
Contribute to Your 401(k)
If your employer offers a traditional 401(k) plan, you have the option to contribute a portion of your pre-tax income. By contributing some of your paychecks before any taxes are calculated, you could potentially benefit from tax savings associated with your contributions.
Some employers may offer to match your contributions. In that event, be sure you’re contributing enough to take advantage of the matching offer. It amounts to free money you otherwise wouldn’t have.
Invest Wisely
From time to time, take the opportunity to review your investments. Look at your retirement accounts, investments or other savings assets and confirm that they’re performing the way you hoped.
If you have a fund that isn’t performing as well as you expected, think about seeking some advice about alternatives that might offer a better return on your money.
Open an IRA
Think about opening an individual retirement account (IRA) to help you boost your retirement savings. Money you contribute to a traditional IRA could be tax-deductible in some circumstances. Your investment earnings may be tax-deferred until after you start making withdrawals throughout your retirement years.
Alternatively, if you meet the required income eligibility requirements, perhaps a Roth IRA might be a preferable option for you. Your contributions are funded from after-tax money, so once you start making withdrawals they may be federal tax-free.
Diversify Your Investments
Putting all of your retirement savings into one account or asset class might be the easy option for many people. However, by diversifying your investments you have the potential to increase your retirement nest-egg.
If you’ve been contributing solely to your 401(k), consider whether you can also afford to put a little money into mutual funds or your IRA to boost your overall savings across several asset types.
If you have a strong risk profile, you might also want to think about whether investing in the stock market might also offer additional opportunities to build wealth. If you’re thinking of diversifying your retirement savings by investing in the stock market, think about buying shares in sectors that promise good growth in coming years. You can learn more from OilandEnergyInvestor.com/2015/10/the-one-element-that-will-change-the-energy-landscape/.
The efforts you make towards saving and investing during your working years could mean the difference between living comfortably in retirement or not. If you’ve been ignoring your retirement savings, stop and take a moment to assess how you’ll survive during your retirement years.
Think about whether you’ll have enough money put aside to allow you to stop working and enjoy your retirement. Then work out how much you need to start saving now to help you achieve that goal.
Eleanor Cole is a personal finance consultant who can be found writing about retirement funds, investment opportunities and a variety of other finance topics online.
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