Saving for retirement is one of the most important financial goals there is—but it isn’t always easy. Even with the best intentions, it can be difficult to discipline yourself to put money away for a nebulous “someday,” especially when you’re busy trying to make ends meet now.
But there are plenty of ways to save for retirement more efficiently, making every dollar go a little bit further toward a well-deserved rest in your golden years.
A lot of the “getting started” part is becoming educated on how different retirement plans work and what your options might be depending on your financial situation.
1. Contributing to Your 401(k)
If your company offers a 401(k), it’s usually a good idea to contribute to it, at least a little bit. The contributions will be automatically deducted from your paycheck and may also be made from pre-tax money, which will lower your taxable income.
Recommended: What Is a 401k?
2. Taking Advantage of Your 401(k) Match
If your employer offers a 401(k) match, there is even more incentive to contribute. A match is about as close as it comes to free money and is considered part of an employee benefits package. Your company may have a vesting schedule, meaning you don’t obtain full ownership of its contributions until you’ve been working at the company for a certain amount of time. You’ll always maintain full ownership over the money your contributions, however.
3. Starting Early
Thanks to the power of compound interest, the earlier you start saving for retirement, the more you’ll likely make over time. It’s never too early to start—so get cracking!
Recommended: When to Start Saving for Retirement
4. Contributing Often
Making regular contributions is one of the best ways to grow your retirement funds. With a company-sponsored retirement fund like a 401(k), the money comes out of your paycheck each period. But if you’re DIYing your retirement with an IRA, for instance, you’re in charge of making sure money’s going in.
5. Considering an IRA
Even if you are actively investing in a 401(k), you may be able to boost your retirement savings even more by also opening an IRA. If you’re self-employed or working at a job that doesn’t offer retirement benefits, an IRA might be the very best choice available for you. IRAs are easy to open and available to almost anyone, so long as you earn an income.
6. Maxing Out Your IRA
The contribution maximum for IRAs is relatively low, compared to 401(k): For 2022, you can contribute up to $6,000 per year to your IRA, or $7,000 if you’re aged 50 or over and eligible for catch-up contributions. Maxing out your IRA each year can help set the foundation for a successful retirement and also help you save money on taxes during the year the funds are contributed if you’re eligible.
Recommended: How Much Can You Put in an IRA This Year?
7. Ruminating on a Roth
A Roth IRA works a little differently than traditional IRAs and 401(k)s. Rather than getting a tax break now, you’ll get it later when you take the funds out during your retirement years. If you’re eligible for a Roth account, you may be able to have some tax-free income in retirement.
8. Using a Roth Indirectly
If you earn more than $129,000 as a single person or $204,000 as a couple (for 2022), your eligibility to contribute to a Roth is reduced—and if you earn much more than that, you may be ineligible entirely. However, you can still transfer the funds in a traditional IRA into a Roth account, provided you pay income taxes when you do so. This can help you score those tax-free earnings, even if you earn too much to directly contribute.
9. Paying Attention to Your Allocation
Contributing to your 401(k)—or any retirement account—is just the start. In order to get that money growing, you need to make sure it’s allocated into investment categories like stocks, bonds, and cash. How your investments are allocated is likely to change over time, depending on your risk tolerance and the length of time before you plan to retire.
(If you have specific investment questions, we always recommend chatting with a qualified financial planner or other investing professional.)
10. Diversifying Your Investments
Allocation and diversification go together like peanut butter and jelly. Maintaining a diverse portfolio helps you avoid having all of your investment eggs in one basket. If one company—or even one segment of the market—starts to falter, you have other investments to fall back on.
Recommended: Why Portfolio Diversification Matters
11. Keeping an Eye on Account Fees
Even if you’re diligent in looking at how to maximize your retirement savings, maintenance and trading fees can quickly eat into your funds—and these fees do vary depending on what financial institution manages your account. It’s worth shopping around for an account that has reasonable 401(k) fees.
12. Taking Advantage of an HSA
An HSA, or Health Savings Account, isn’t a retirement vehicle in its own right, but it can help you boost your retirement savings if it is treated as a retirement account. To qualify for an HSA, you must have a High Deductible Health Plan, among other requirements. HSAs are portable, so you can take them with you if you change employers or retire. Distributions taken for qualified medical expenses are tax-free, but non-medical distributions are taxable and may be subject to an additional 20% penalty.
13. Taking It With You
These days, few people stay at the same job for their whole careers. If you’ve been accruing retirement savings in a 401(k), it could be tempting to cash it out and treat it as a windfall when you change employers. But early withdrawal comes with a 10% penalty tax from the IRS, not to mention the regular income taxes you’ll have to pay on the money. It’s probably a way better idea to roll it into a new 401(k) or IRA and keep it growing.
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Keeping Track of Everyday Finances
After you’ve taken the steps to start saving for retirement and have a solid plan in place, it’s a good idea to make sure you are contributing as much as you can during your prime working years.
15. Asking For a Raise
This one might cause a little stress, but it can pay off with an income increase just with a single conversation. Gather the specifics about why you’re an awesome employee and put on your negotiating hat. If you’re feeling bold, you might also ask for a retirement-specific benefit as part of the deliberations, like an increased 401(k) match!
15. Making Friends With Your Budget
Budgeting is the key to so many personal finance matters, and saving for retirement is no different. By seeing where the money is coming in and going out, you might find some places to cut back and find more money to stash away for the future. If you haven’t spent some time with your budget in a while, sit down and get to know it.
16. Setting and Adjusting a Monthly Savings Goal
The amount you’re able to set aside for retirement will depend on your current earnings, cost of living, and many other factors. While an oft-cited rule of thumb suggests saving 15% of your income, that may not be feasible for you. However, it’s still worthwhile to sit down and set a specific monthly retirement savings goal and commit to putting that much away. Focusing on how to increase your savings rate when your income or other life factors change will likely keep your retirement goals in sight.
Recommended: How to Make a Monthly Budget
17. Saving First
When you’re budgeting your income and expenses, it can be easy to leave savings as the last line item. By committing to saving first (setting money aside as soon as you get it), you’ll ensure you’re actually contributing to your retirement fund on a regular basis, helping it continue to grow as effectively as possible over time.
18. Automating Your Savings
One easy way to ensure you don’t fall behind: Automate your retirement savings. Most brokerages and platforms have an option to allow you to automatically invest a certain amount on a regular basis. Again, just be sure you’re actually allocating the funds once they hit your account.
19. Spending Wisely on Food
We’ve all got to eat—which means we all spend money on food. But how much money we spend is another matter entirely. According to the latest data from the USDA , a household of two might spend as little as $410.60 on a month’s worth of groceries or as much as $815.60—a wide range. There are plenty of suggestions online for saving money on a grocery budget, so paying attention to expenditures here and getting creative with meals will probably net some savings to add to a retirement account.
Finding a Little Extra to Contribute
20. Starting a Side Gig
You can only make so many budget cuts, but you can almost always find ways to make extra money. Whether it’s freelance writing or selling your crafts on Etsy, a side-hustle might be a great way to increase the amount of cash you have on hand to put toward retirement.
21. Looking For Interest-Bearing Accounts
Regular interest-bearing checking and savings accounts are still out there. Even though the interest earned might be minimal compared to investment accounts, it’s still better than not earning interest on those accounts at all.
22. Stashing Your Tax Return
If you’re getting a tax return, it may be tempting to spend the money on fun things, but when calculating how to maximize your retirement savings, it’s worth considering funneling some or all of it into your investment account. Saving instead of spending this money could add up to major nest egg increases.
23. Ditching Your Car
Aside from housing, car ownership can be one of the most expensive parts of day-to-day living for many people. It’s not just the cost of the vehicle itself, but also insurance, maintenance, and fuel. If you live in the kind of city where you could rely on public transit or take your bike to work, doing so might be a great way to make some substantial monthly savings.
24. Lowering Your Housing Cost
Assessing your true housing needs is likely a major decision within a household, but if you live in a house that’s bigger than you need or in a pricey part of town, for example, it could be worth it to look at alternatives. Paying less monthly rent, lower taxes, or even saving on transportation costs by moving closer to work could lead to substantial savings each month and help maximize your retirement savings.
25. Considering Home Ownership
Renting can be a good option for certain needs, lifestyles, or periods of your life. But homeowners do tend to accrue more wealth over time. Buying and selling often tends to cost money in closing and moving costs, so if owning a home is something you want to do, buying a home and staying there for a number of years is typically a better way to handle an investment like this.
26. Knocking Out Credit Card Debt
While any kind of debt can put an anchor on your retirement goals (and other financial goals, for that matter), credit card debt can be particularly egregious thanks to high-interest rates and compounding, which means you can end up paying interest on the interest you’ve already been charged. By tackling credit card debt, and other high-interest debts, you’ll have the opportunity to save more money to put toward retirement.
Planning for Your Golden Years
27. Starting a 529 Plan
This relates indirectly to boosting your retirement savings, but since paying for a child’s college costs can quickly derail a parent’s retirement plan, thinking about this major expense ahead of time can be a wise financial move. Many experts suggest making sure you’ve funded your own retirement accounts before you fund education accounts for your children. Each state operates its own 529 plan and the terms vary from state to state. The plans are not tax-deductible on a federal tax return, but a 529 plan can offer some tax advantages on the state level depending on the state.
28. Making a Detailed Retirement Spending Plan
Any amount you save for retirement will still be a finite amount—which means it’s important to plan ahead of time how you’ll budget for it. Consider the costs of everything, including food, medical care, housing, transportation, and entertainment. Try to envision ways to keep your cost of living low so each dollar goes further once you get there.
29. Planning To Retire Somewhere Affordable
No matter how much you’re able to save for retirement, the money will go a lot further if you retire somewhere with a lower cost of living. If you have decades before your retirement date, it may be difficult to predict what the cost of living will look like in different places, but start to think about which locations might offer all the lifestyle factors you want while also being affordable.
Recommended: Cost of Living per State (2022)
30. Taking Advantage of Catch-up Contributions
Once you reach age 50, the contribution caps on your IRA and 401(k) go up substantially—by $1,000 for IRAs and $6,500 for 401(k)s, in 2022. Maxing out these larger retirement caps can help you increase retirement savings you’ve fallen behind on or rebuild retirement savings you cashed out for something else.
Recommended: Important Retirement Contribution Limits
31. Delaying Social Security Retirement Benefits
For many of us, this step might not be coming up anytime soon—but once you’re eligible for Social Security retirement benefits, delaying it might give you a larger monthly benefit during retirement.
Saving for retirement might be challenging, but it’s not impossible. Stretching every dollar as far as you can will make it a lot more doable.
Like so many other financial goals, it all starts with your budget—and budgeting is a lot easier to do when you have a bird’s-eye view of your finances.
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