If you aren’t on course to save $1 million by the time you retire, you’ll have to get creative.
That’s the amount of money a couple will need to live comfortably after they retire, say many experts. Unfortunately, few people are on track to have adequate savings for retirement. According to a Carrer Builder report, 78 percent of full-time workers said they live paycheck to paycheck.
Of course, starting to save early in your career is the easiest way to save enough money. If you
were to save $4,830 annually at 7 percent interest beginning when you are in your 20s, you
would reach $1 million by age 65.
If you’re among the many who need to boost the amount of money in your retirement fund,
your options range from cutting unnecessary spending to investing wisely. Here are a few ways
you can work toward a comfortable retirement:
Cut Expenses
Take a good look at how you spend your money. Some of the top ways we fritter away money
are through dining out at restaurants, drinking alcoholic beverages, paying credit card interest,
buying clothes, wasting electricity by not turning off lights, smoking tobacco, keeping the house
too warm, gambling, playing the lottery, or choosing convenience packaging.
Put spare change toward reducing or eliminating credit card debt, student or auto loans, or
your mortgage. The money you save not paying interest is money you can deposit to your
retirement fund.
Make Good Investment Decisions.
If you have access to a 401(k) through your employer, take advantage of it. It’s an easy way to
save and your employer might match some of your contributions — which is the same as free
money. Plus, money contributed to a 401(k) is taken out before you get a paycheck, making it
easier for you to forget it’s being taken out.
If you don’t have that option, or if you want an extra retirement savings vehicle, talk to a broker
about starting an individual retirement account (IRA). An IRA is an investment account you set
up through a brokerage firm or financial institution. You contribute money to the account,
which is used to purchase investments including stocks, mutual funds and bonds. By opening an
IRA in 2023, you can contribute up to $6,500 a year if you’re under the age of 50 or $7,500 a
year if you’re 50 or older.
Don’t take a break from saving. When you change jobs, get laid off or just stop working, it will
be tempting to stop contributing to your retirement fund. If you’re used to saving to a 401(k)
fund, you could start an IRA until you’re able to contribute again to a 401(k) with employer
matching funds.
You also want to try to resist withdrawing money from your retirement account when life
becomes financially difficult. The penalties you’ll have to pay for withdrawing money from your
retirement account before age 59 ½ can be daunting. For instance, if you are in the 25-percent
tax bracket and you withdraw $10,000 before you’re eligible, you’ll have to pay $3,500 in taxes
and penalties.
Plan for Health Emergencies
While no one wants to think about getting ill, it happens. Fidelity Investments, a financial
services corporation estimates that the average couple will incur $275,000 in healthcare costs
during retirement, not including long-term care expenses.
If you have a high-deductible health plan where you work and your company offers a health
savings account (HSA), any money you save in the account while you’re employed is yours to
use for health expenses — even after you’ve retired.
Earn More
If you have the time, creativity, knowledge or energy, investigate ways to make more money.
You can always get a part-time job or work as a consultant in your field of expertise. If you have
an extra room, you could rent it out on the weekend to travelers through Airbnb or another
rental site. If you’re artistically talented, you could sell your crafts on an online site, such as
Etsy.
For information about setting up an IRA account, please contact us.