10 painless ways to save more for retirement

Saving for retirement doesn’t have to be a chore. A few small changes can result in a much bigger retirement account balance, given enough time to compound. Here are some ways to save more for retirement without reducing your quality of life.

Save 1% More

A small increase in saving can result in a big increase in your retirement nest egg over time. If you earn $50,000 per year, save 1% more ($42 per month) and earn 6% annual returns, you will have an extra $57,517 after 35 years. “Every year, set aside a little bit more than the year before,” says Michelle Smalenberger, a certified financial planner and CEO of Financial Design Studio in Deer Park, Illinois. “If you set aside $5,000 last year, increase that to $5,100, for example.”

[See: How Much Should You Contribute to a 401(k)?]

Redirect Your Raise

Raises offer an opportunity to boost the amount you are saving for retirement without reducing your take-home pay. The next time you get a pay increase, consider tucking a portion of it into a retirement account. “There’s no better way to compound your retirement savings than by increasing your contributions whenever you get a pay raise,” says Bill Nelson, a certified financial planner and founder of Pacesetter Planning in Natick, Massachusetts. “Your paycheck will still be bigger as a result from the raise, so you won’t even notice the money is ‘missing.'”

Contribute Your Tax Refund

You can deposit your tax refund in a traditional IRA or Roth IRA using IRS Form 8888. You can elect to apply the IRA contribution to your current tax return or the following tax year. “If you get a tax refund, the government has essentially ‘saved’ this money for you throughout the tax year,” Nelson says. “By redirecting this savings into an IRA when you get your tax refund, you’ll be adding to your retirement fund without even realizing the money is gone.”

[10 Strategies to Maximize Your 401(k) Balance.]

Reallocate Windfalls

If you receive a bonus, inheritance, prize money or other windfall of cash, avoid the temptation to spend it immediately. Make a habit of putting a portion of every influx of cash aside for retirement. You can avoid some of the tax implications of receiving extra income if you tuck the money into a 401(k) or IRA. Income tax won’t be due on the money until you withdraw it from the account.

Get a 401(k) Match

Be sure to save enough to qualify for employer contributions to your 401(k). “I recommend putting away enough in the employer plan to maximize the match and get the free money,” says Megan Donnelly, a certified financial planner for Quabbin Advisors in Wilbraham, Massachusetts. And before leaving a job, ensure you’re vested in the 401(k) plan so you can take those employer contributions with you.

Claim Tax Breaks

Your money will grow faster without the drag of taxes. You can delay paying income tax using a traditional 401(k) or IRA, or prepay taxes using a Roth 401(k) or Roth IRA. “Having a Roth IRA provides options in retirement during the withdrawal stage,” Donnelly says. “There is a lot you can do to manage your taxes better if you have a Roth set up before you retire.” Low- and moderate-income savers may additionally qualify for the saver’s credit.

Pay Lower Fees

Don’t pay more than what is necessary to invest. Use your annual 401(k) fee disclosure statement to identify low-cost funds in your 401(k) plan or shop around for inexpensive index funds for your IRA. Lower fees mean you get to keep more of your money.

[See: 9 Ways to Avoid 401(k) Fees and Penalties.]

Avoid Penalties

Watch out for early withdrawal penalties if you withdraw money from your retirement accounts before age 59 1/2. There might also be fees if you frequently trade funds. Remember to begin retirement account withdrawals after age 70 1/2 to avoid another penalty.

Cut One Unnecessary Expense

A gym membership you don’t use or an expensive cable TV package you don’t have time to watch are classic examples of costs that are easy to eliminate. Cut an unnecessarily or duplicative service and funnel that savings into a retirement account.

Automate Saving

Contributions to your 401(k) are typically automatically withheld from your paycheck, so you don’t have to take any action to save a portion of your income every pay period. You can also set up a direct deposit to an IRA. “Automation is the easiest way to make sure you’re saving,” Smalenberger says. “By automating the amount, you never see the funds in your bank account for spending.”

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10 Painless Ways to Save More for Retirement originally appeared on usnews.com

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