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Can't Save as Much for Retirement as You Want? Try These Tactics

Saving enough for retirement is a challenge in the best of times, and with inflation at its highest point in decades, we’re most certainly not in the best of times right now. It can be stressful to know you’re not saving as much as you want, but that doesn’t mean you should give up. Here are a few things you can try in order to get yourself back on track.

Start from where you are and build up slowly

Start by making note of how much you’re currently contributing for retirement and how much you think you need to save each month in order to retire comfortably. Note the difference between the two.

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If you haven’t already done so, look to see if you can make any budgeting changes to free up extra cash. You might cancel unused subscriptions or limit other discretionary purchases. You could also try increasing your income by working overtime or picking up side jobs. If you’re able to find extra cash this way, it can be the quickest strategy for getting your retirement savings back on track.

But when that’s not possible, you have to just accept where you are. Continue saving as much as you’re able to right now and make it your goal to boost your contributions by 1% of your income every year. If you earn $40,000 per year, that’s only an extra $400 per year, or about $33 per month. Try to slowly inch your retirement contributions up over time until they’re where you want them to be.

Put your money where it’ll do the most good

In addition, you need to place your retirement savings in the account that offers the most benefit for you. This will depend on your goals, financial situation, and what retirement accounts you have access to.

A 401(k) is a great place to begin if you qualify for an employer match. This is extra money you get for putting some of your paycheck into your 401(k). How much you get depends on your company’s matching formula and your salary. It’s possible that this matching contribution could make up for the smaller contributions you’re personally making for retirement.

If you don’t have access to a 401(k) or yours doesn’t offer a match, consider a Roth IRA instead. These accounts don’t give you the upfront tax break that many 401(k)s and traditional IRAs do. But you get tax-free withdrawals in retirement. That can help your nest egg stretch a lot further because you won’t have to give any of your Roth IRA funds back to the government as long as you’ve had the account for at least five years and are at least 59 1/2 before you withdraw any earnings.

You can contribute up to $6,000 to an IRA in 2022 or $7,000 if you’re 50 or older. This limit applies to all your IRAs — Roth and traditional — not to each one separately. If you max those out, you might consider returning to your 401(k). You can save up to $20,500 in a 401(k) this year or $27,000 if you’re 50 or older.

Another option is a health savings account (HSA). Contributions to these accounts reduce your taxable income for the year, and if you use the money for medical expenses at any age, it’s tax-free. Individuals may contribute up to $3,650 to an HSA in 2022 if they have a health insurance plan with a deductible of $1,400 or more. Families may contribute up to $7,300 if their insurance deductible is $2,800 or more. Adults 55 and older can contribute an extra $1,000 beyond the above limits.

If you choose an HSA, make sure you look for a provider that will enable you to invest your funds. Otherwise, you won’t earn much on them over time. Many banks and some brokers offer HSAs these days.

Be prepared to adjust your retirement timeline

Even if you do the above things, you might need to rethink your retirement timeline if you’re not saving as much as you’d like. Delaying retirement, even for a few months, gives you additional time to save while allowing your investments to grow further. It also reduces the cost of your retirement by shortening its length.

If that doesn’t appeal to you, you’ll have to work hard to increase your retirement contributions when you’re able to do so. If you get a raise, make sure you boost your retirement contributions before anything else. And continue to make contributions as regularly as possible between now and retirement.

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