Most financial professionals agree you should save at least 10-15 percent of your salary for your golden years. If you’re not saving that amount or need more to achieve your ideal retirement, the question often asked is, “How can I add to my savings without drastically changing my lifestyle today?”
Here are seven ways to potentially make a positive difference:
1. Commit to saving for retirement. If you’ve started putting money away for retirement, stick with it. You’ll likely face situations that can disrupt your steady stream of savings, such as taking a new job, moving or paying unexpected medical bills. Your expenses are bound to move up and down, but missing out on months or years of savings can have a significant impact on your total nest egg – especially if you’re far from retirement and time for compounding interest is on your side.
2. Create a budget – and stick to it. Make retirement a priority in your monthly budget. Start by looking at your recent spending and identify ways to allocate more money to your retirement account. Do you have a recurring subscription, gym membership or cable package you don’t use? Consider eliminating one unnecessary expense and put that money aside instead. Next, establish a clear savings goal for future months. Having a goal could help you rein in impulse purchases.
3. Take advantage of your 401(k) match. Don’t miss out if your company provides matching contributions when you defer income into your workplace retirement plan. For example, if your employer offers to match the equivalent of 3 percent of your income, consider deferring at least 3 percent of your income into the plan. In effect, you’ll double your money even before it is invested.
4. Be smart about taxes. A high percentage of Americans receive a sizable tax refund each year. If that describes you, consider investing your refund in your workplace retirement plan or an individual retirement account. If you’re tempted to spend the money on something today, think about how much further your refund would go in retirement once it’s given the chance to grow over time.
On the flip side, if you pay a substantial amount at tax time, make sure you’re approaching your tax liability in the most strategic way possible.
5. Increase savings once you’re an empty nester. Chances are your expenses will decrease once your children are financially independent. Earmark the money you once spent on hockey gear, your kids’ health insurance or college tuition toward your golden years. While it can be tempting to remodel the kitchen or take a parents-only cruise with the additional cash, financial security in retirement should take priority.
6. Review your insurance policies. Compare your auto and home insurance costs with other providers to see if you can get a better deal. And be sure to read the fine print before switching so that you don’t sacrifice important coverage in order to save a few dollars. Also, check to see if you qualify for discounts based on your lifestyle or habits.
7. Save salary increases. Make a commitment to your future self by allocating your year-end or performance bonus to retirement, if you’re fortunate enough to receive one. And the next time you earn a promotion or raise, think about increasing your workplace retirement savings accordingly.
Even a 1 percent increase in the amount you defer to your 401(k) can make an impact on the size of your retirement nest egg.
Paula Dougherty is a certified financial planner and private wealth adviser with Ameriprise Financial Services Inc. in Springfield. She can be reached at paula.j.dougherty@ampf.com.
