Saving for retirement is an important thing . But let’s face it — it’s not always an easy or fun thing.
To consistently fund a 401(k) or IRA, you’ll probably need to give something up. That something may be a nicer car, a much-needed vacation, or home maintenance you’d like to outsource.
But the reality is that planning to retire on Social Security alone is a bad idea. Those benefits will only replace about 40% of your paycheck if you’re an average earner, and most seniors need more like 70% to 80% of their pre-retirement income to manage their expenses well.
This especially holds true these days given the way inflation is soaring. In fact, many seniors who get all or most of their income from Social Security at present are struggling financially thanks to higher costs at the pump, the supermarket, and just about everywhere. But those with savings to tap are no doubt faring better.
If your retirement savings aren’t progressing the way you think they should be, you’re in good company. In a recent Paychex survey, 73% of workers admitted they should be saving more for retirement. But 79% also said that can’t afford to increase their 401(k) or IRA contributions.
If that’s the boat you’re in, you may have more options for boosting your savings than you think. Here are some to explore.
1. Make sure you claim your full 401(k) match
Are you contributing enough to your 401(k) to take full advantage of your employer matching program? That’s probably the easiest thing you can do to boost your savings, so see what your matching incentive looks like and shift your spending around as needed to snag that match in full.
Maybe your employer matches 100% of contributions up to $3,000, and you’re currently putting $2,400 into your 401(k). If you can manage to ramp up your contributions by just $50 a month, you’ll effectively double that effort by claiming your full match.
2. Get a side hustle
The gig economy is booming these days, so there are plenty of flexible side jobs available that could provide you with a nice income boost. And since that’s money you’re not used to living on, you should, conceivably, be able to use all of it to fund your retirement savings.
Remember, if you put money into a traditional 401(k) or IRA, your contributions go in on a pre-tax basis. So if you earn $2,000 from a side job, you can dump that entire $2,000 into your retirement plan.
3. Give up one small thing (or more, if you’re willing)
You may have heard that giving up store-bought coffee every day will help you retire a millionaire. That’s probably not true. But giving up a small luxury could help you boost your savings significantly.
Imagine you decide to start making your own coffee, thereby freeing up $50 a month for your retirement savings. If you sneak an extra $600 into your 401(k) or IRA this year, leave that money alone for 30 years, and invest it an average annual 8% return (which is a little bit below the stock market’s average), you’ll boost your nest egg by $6,000.
Granted, you might think that $6,000 isn’t a ton of money in the grand scheme of retirement. And to be fair, it’s not. But that’s the impact of cutting just one expense for one year. And if you’re willing to cut more expenses for a single year or multiple years, the impact could be far more significant.
It’s important to have income outside of Social Security once you enter retirement. If you nest egg needs work, follow these tips to grow your savings — and avoid financial stress down the line.