Boost your balance.
Saving for retirement doesn’t have to be a chore. A few small changes can result in a much bigger account balance, given enough time to compound. Here are some ways to save more for retirement without reducing your quality of life.
Save 1 percent more.
A small increase in saving can result in a big increase in your retirement nest egg if given enough time to compound. If you earn $50,000 per year, save 1 percent more ($42 per month) and earn 6 percent annual returns, you will have an extra $57,517 after 35 years.
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.
Contribute your tax refund.
You can deposit your tax refund in a traditional IRA, Roth IRA or myRA using IRS Form 8888. You can elect to apply the IRA contribution to your current tax return or the following tax year.
Set aside your bonus.
You can avoid some of the tax implications of receiving a bonus 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.
Reallocate windfalls.
If you receive an 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.
Get a 401(k) match.
When making job decisions, remember to take into account employer contributions to your 401(k). 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. 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.
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.
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10 Painless Ways to Save More for Retirement originally appeared on usnews.com
