If you’re worried about the prospect of retiring without enough money to sustain your current lifestyle, you’re not alone. A large percentage of Americans face the same dire situation, with a massive decrease in disposable income very likely the moment they retire from the workforce.
However, there are ways you can increase your retirement savings so that you don’t need to struggle financially during your golden years. The key is to make a realistic plan based around your current income and then work on ways to build up what you already have.
Contribute to Your 401(k)
Consider contributing a small portion of your salary into your 401(k). This doesn’t need to be a lot of money to begin with, but every cent extra you contribute will add up over a number of years to quite a lot of money. Whatever amounts you can contribute into your 401(k) are tax deductible, so you’ll be reducing your taxable income as a bonus. Aside from this, you may also receive a matching contribution from your employer, which effectively doubles your contribution.
Take Advantage of Tax Breaks
If you opt for a traditional IRA you could take advantage of their tax-deferred growth benefit. This simply means you don’t pay any taxes on the gains your investments make until after you withdraw from it. In some cases, your contributions into a traditional IRA may also be tax deductible.
By comparison, contributing to a Roth IRA isn’t tax deductible but you don’t pay any tax when you do withdraw from it. If you anticipate plenty of growth in your Roth IRA over a number of years, you can take advantage of the tax-free growth benefit.
Start an Emergency Savings Plan
Many people put as much money as they can into their retirement savings but they don’t have much left to form an emergency savings fund. It’s important that you find ways to increase the amount of savings you have in available cash. This can be crucial for paying those unexpected bills or other costs that arise from time to time.
Put away a comfortable amount of money on a regular basis into a high interest bearing savings account. Only withdraw from this in the case of an emergency.
If you’re planning for a comfortable retirement, you really should include a debt reduction plan in your strategy. This means clearing out any credit cards, personal loans or traditional mortgages you’re still paying off.
You’ll place less of a strain on your retirement income if you don’t need to make regular repayments on outstanding debts.
Consider a Reverse Mortgage
It is possible for some people to convert a portion of their equity into cash after retirement using a reverse mortgage. This type of mortgage doesn’t require you to make regular repayments on it, but you are able to use the money for whatever purpose you want.
This means you can use it to supplement your retirement income, or use it to invest in other things to increase your retirement savings.
Talk to a Professional
Perhaps the best thing you can do for your retirement fund is to discuss your plans and goals with a professional. By talking to a professional, you may find there are other options open to you that you may not have previously considered. You may also receive more tips that are pertinent to your individual situation.
Work on putting these tips into practice with your own budget. Even small steps in the right direction can add up to big benefits in the long run, so don’t discount even those small things you do. They all help you reach your financial goals in the end.