5 Ways to Boost the Amount that You Save for Retirement
- Author: William Asher
- Posted: 2024-04-26
5 Ways to Boost the Amount that You Save for Retirement
Experts tell you that investing an extra $1,000 per month will help you retire earlier and with a higher lifestyle. This is a goal that is out of reach for most American households. However, this does not mean that it is impossible for Americans to save more. Even if you find just a little bit of extra money on the side to invest, the power of compounding will mean that your money will be there for you and then some in the future. Here are five ways to get some extra money here and there for retirement.
Pay Down Debt
If you have debt with a high interest rate, paying this down should take an even higher priority. Cutting down on this debt will also help put you on the right path when it comes to retirement savings. If you are able to either eliminate or reduce some of your credit card debt, it could save you hundreds of dollars each month in interest payment. For example, if you have $20,000 in credit debt at a 25% interest rate, that costs you $5,000 per year in interest payments. Just having this money alone at your disposal each year could be enough to be your savings for retirement. When added to your 401(k), this on its own could be enough to secure your retirement.
Invest Your Change
This may be small change, but the number adds up each year. For example, if you use a service like Acorn to round up your purchases and invest them into the stock market, it could net you a couple of hundred dollars each year. To be clear, you pay for this, and it is not free money. Nonetheless, adopting this habit will force you to save money. Even a couple of hundred dollar now compounded in the future could pay your living expenses for a ween in retirement. Even though you may forget about it now, you will be pleasantly surprised years in the future to see a meaningful balance in this account.
Work an Extra Couple of Hours Per Week
In the gig economy, it is easier than ever to pick up an hour or two of extra work each week without overly taxing yourself. Even earning a couple of thousand of dollars each year that you can devote solely to retirement can be the difference in being able to retire on time. You can pick up discrete tasks in your free time without the commitment of a formal second position. While it is tempting to spend the extra money that you earn, putting it aside can supplement your other retirement savings in a way that really builds your asset base. Even if you just earn $20 here and there, it adds up quickly.
Maximize Your Employer's Match
When your employer offers a 401(k) match to you, it is free money. When there is a $20 bill on the ground, you would certainly bend down to retrieve it. The same goes for other free money that is there for the taking. The best part about your 401(k) matching money is that you are even saving money when you put aside your part of it. The fact that your retirement contributions come from pre-tax dollars means that saving for retirement will only cost you roughly 67 cents on the dollar. On top of that, you will receive your employer's match. This is the reason why putting aside close to the maximum amount in your 401(k) each year should be a habit that goes without saying.
Save Your Tax Refund Every Year
Many people look at their tax refund as "found money" and move to spend it as quickly as possible on things such as vacations. This cannot be further from the truth. In reality, your tax refund is your money that you earned throughout the year that the IRS is giving back to you because they took too much in withholding. Understanding that, it may change how you think about what to do with your tax refund. If your tax refund averages $2,000 per year, and you save it each year, that along could be a large part of the money that you need to retire. If you do not need to pay down debt, your first option should be to invest your tax refund each year.
