How to Save More for Your Retirement

How to Save More for Your Retirement

If you don’t want to have to reduce your standard of living during your retirement, you’ll need to be smart about how you save. Don’t just stop at regular contributions to your 401(k) plan—try these additional tips and strategies to boost your savings as much as possible and to make the most of every dollar you put away.

Divert part of your raise to your retirement savings.

One of the simplest ways to significantly increase the amount you’re saving is to increase your 401(k)-contribution percentage each time you get a raise. For example, if you receive a 4 percent raise, try upping the percentage you contribute to your 401(k) plan by 2 percent. This approach solves one of the biggest issues many people have with saving for retirement: being unwilling or unable to accept a smaller paycheck now, even if it means getting a larger paycheck in retirement. By diverting some of your raise to your 401(k), you’ll enjoy both the benefits of a raise and the satisfaction of knowing you’ll have more in the bank when you stop working.


Contribute at a higher rate from a bonus.

Just like a raise, bonus pay is a great source of extra retirement savings that you can take advantage of without having to reduce your current paycheck. And the good news is that you don’t have to permanently increase your 401(k)-contribution percentage in order to do so. Most employers will allow you to temporarily adjust your contribution percentage to a much higher rate during the pay period in which you receive your bonus; then, in future pay periods, you can go back to your former contribution rate.

Make sure you’re capturing your full employer match.

According to a 2017 report from benefits administrator Alight Solutions, 1 in 5 workers aren’t contributing enough to their 401(k) plan to get the full match offered by their employer. Essentially, this is the same thing as turning down free money, and it’s one of the biggest mistakes you can make when it comes to saving for your retirement. If you’re not sure whether you’re receiving the maximum matching contributions that you’re entitled to from your employer, check with your benefits department to verify your own contributions and your company’s matching contribution formula.

Open a health savings account.

If you have access to a health savings account (HSA) through your employer, don’t pass up the chance to take advantage of this amazing savings tool. Incredibly, HSAs are triple tax-free—this means that 1) no federal, state, Social Security, or Medicare taxes are withheld from payroll contributions, 2) balances accumulate tax-free, and 3) distributions used for qualified expenses do not have tax deducted. Furthermore, balances are rolled forward rather than forfeited at the end of each year, as is the case with some flexible spending accounts.

It’s true that an HSA is not technically a retirement savings account, but given that you’re certain to have at least some healthcare expenses in your later years, it’s an excellent and efficient way to ensure those costs are covered.

medical costs

Make IRA contributions.

If you’re already making the maximum contributions to your employer’s 401(k) plan, it might be a good idea to think about other ways to save. An individual retirement account (IRA) is another tax-advantaged investing tool that helps you put away money for your retirement. An IRA can also be a very useful savings vehicle if you (or your spouse) do not have access to an employer-sponsored 401(k). Note: only earned income that meets IRA rules is eligible for contributions.

Make catch-up contributions.

Did you know that you’re allowed to make additional contributions to your 401(k) if you’re over the age of 50? In 2018, for example, people aged 50 and older were permitted to contribute up to $6,000 more to a 401(k) plan (the IRS 401(k) contribution limit that year was $18,500). This is a great way to boost your current savings levels or to “catch up” if you didn’t start saving for retirement until later in life.

Use the Saver’s Credit.

Not surprisingly, it’s especially difficult for low- and middle-income workers to save enough for retirement. This is where the Saver’s Credit comes in. Designed to give workers in low- and middle-income brackets some extra motivation to start putting away money for the future, the Saver’s Credit comes in the form of a tax credit worth up to $1,000 (in 2018) that you can receive if you made contributions to a retirement plan or an IRA during the tax year. There are income limitations, but contributions made to either a traditional or a Roth IRA account qualify. You can apply for the Saver’s Credit when you file your taxes.