If you are feeling behind on your retirement savings, don’t worry, you’re in good company. Only 43% of American workers take part in a retirement-saving plan, 35% of Americans have no retirement savings at all, and even those who do don’t always feel that they will have enough to live their best life when they retire.
Whether you’re just starting out and you’re thinking ahead, or you’re closer to retirement than you’d like to admit and you want to play catch up on your savings there is still hope!
When planning for retirement, the earlier you start the better of course. We would talk all day about how amazing compound interest is in that scenario, but whether you’re 25 or 45 – or even 55 – it is never too late to get started!
Anyone will give you the advice to find ways to cut corners so you can save more, and look for ways to earn more money with side hustles, but we aren’t just anyone. We know you want more actionable advice so here are some little known secrets to save for retirement twice as fast as everyone else.
- Did you know the Internal Revenue Service (IRS) implemented IRA catch-up contribution limits for those over the age of 50. The catch-up contributions let individuals make up for the years they didn’t invest at all or enough and it lets even those who have consistently made retirement contributions over their lifetime make a mad sprint to the finish during what is often their prime earning and lower spending years. Visit the IRS website for all of the details.
- Live wisely and don’t spend your raises. If you increase your lifestyle to match your raises, you will never have more to save. Invest the extra money instead!
- Use your Health-Savings Account (HSA)! An HSA is a tax-exempt medical savings account available to American taxpayers. Like a 401(k) and 403(b), contributions into an HSA account are made tax-free. However, unlike 401(k)s and 403(b)s, qualified medical distributions are also made tax-free. For most people, health care will be their highest expense in retirement. The more you can save to cover these costs the more financially secure you’ll be in retirement.
- Consider a Roth IRA. A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. Roth IRA rules dictate that as long as you’ve owned your account for 5 years and you are at age 59½ or older, you can withdraw your money when you want to and you won’t owe any federal taxes.
- It’s the little things. Every time you want to order in food but you cook at home instead, add the money you would have spent into a savings account. Want to order the large coffee but you got a medium instead – add it to the savings account. Every dollar helps! Eventually you can transfer the money from savings into the aforementioned Roth IRA or other savings / investment accounts.
Saving can be really discouraging at times when it feels like it is slow going, but one day you will look back and see how the small changes in your lifestyle and savings added up to a big step in the right direction for your retirement plans.