Here’s a bit of bad news for you — retirement will probably cost more money than you think it will.
Many people expect their living expenses to drop drastically once they stop working, but when you stop and think about it, there’s a good chance most of your expenses will stay the same. Some might even increase (think healthcare).
It’s for this reason that you need to approach retirement with a healthy level of savings. If you go in ill-prepared, you might really struggle to cover your expenses once your career comes to an end.
And if you’re thinking of falling back on Social Security, well, don’t. Those benefits will only replace about 40% of your pre-retirement income if you’re an average earner, and most seniors need roughly double that amount to live comfortably.
If you’re already in the habit of setting funds aside for retirement, congrats — you’re doing your future self a solid. But if you can also acknowledge that you’re not saving as much as you could be, well, then it’s time to do better. Here are a few painless ways to sneak more money into your retirement plan — and boost your savings rate in a meaningful way.
1. Make sure you’re snagging your full employer 401(k) match
Many employers that sponsor 401(k) plans also match the contributions employees put in, at least to some degree. If you’re not currently snagging that match in full, push yourself to raise your contribution rate so you can claim every dollar you’re entitled to.
Employer matching dollars are effectively free money for your senior years. If your company will match contributions of up to $5,000 and you’re currently only putting in $3,000 a year, pushing yourself to save $2,000 more will actually result in an extra $4,000 a year in your savings plan. That’s pretty sweet.
2. Get used to following a budget
It’s easy to lose track of where your money goes when bills keep popping up and other expenses, like leisure, eat away at your income. But if you make a point to stick to a budget, you might manage to carve out more savings.
Setting up a budget is easy. You just list your monthly expenses, factor in one-time expenses, and then make sure there’s enough money left over to do a better job of funding your savings. Once you have those different spending categories mapped out, you’ll be in a better position to tweak them as needed to meet your savings goals.
3. Automate your IRA contributions
When you sign up for a 401(k), your payroll department deducts your contributions from your earnings off the bat so you’re not tempted to spend that money. IRAs generally work differently in that you open an account and manually put money into it as you can.
But some IRAs offer an automatic savings feature that works just like a 401(k). And taking advantage of that option could help you stay on track with your contributions.
Take your savings to the next level
Some people have a goal of retiring with millions of dollars to their name. Others simply want enough money to pay the bills and enjoy some modest travel. No matter where you fall on that spectrum, the more money you’re able to bank for your senior years, the better, so follow these tips to boost your savings with ease.