If you plan to retire one day, use these 15 tips to help you build up your retirement savings. Because retirement planning is not just for retired people, knowing these crucial retirement savings tips can help you to prepare now.
Regardless of the status of your retirement plan and retirement savings today, it’s possible to feel more confident about your future and live the retirement you dream of.
It's not easy to build your retirement savings, but it is possible to build healthy habits that will pay off in the long run.
In this article, you’ll receive retirement savings tips for those under age 50, between the ages of 50 and 64, and 65 years and older.
Thoughts About How to Build Your Retirement Savings
Start by analyzing your personal balance sheet to discover ways to save. Never stop searching for ways to add to your retirement savings.
For instance, pay off high-cost credit card bills if you have them. Doing so can save you in excess of 10 percent on these credit card loans. Your FICO credit scores may also improve as a result.
Don't waste your money on frivolous pleasures. For instance, if you enjoy freshly brewed coffee at work, bring your own carafe. You can save $5 or more every day. If you get lunch, consider making your own to save even more dollars to add to your retirement savings.
Consider remote employment opportunities if these are available to you. It's possible to save on expensive commute costs, career clothing, and more.
You’re Under the Age of 50 Now
Whether you started saving for retirement decades ago or you’re able to really see yourself not working, you grasp the importance of retirement planning.
Perhaps it’s time to revise your retirement goals. Consider the retirement lifestyle you want and some of your dreams for these golden years.
If you plan to work past the typical Social Security full retirement age, you may want to start a business, volunteer, travel, or visit your children and grandchildren often.
Maybe your goals include enjoying nature and building the lake cabin of your dreams. It's all up to you.
Whatever your retirement vision, it’s important to plan now. Get advice for your retirement plans as soon as possible. If your goals change in the future, it’s always possible to adjust your plan. Get started today!
Tips to Help You Build Up Your Retirement Savings
Ideally, retirement planning means starting early and saving a lot. If you didn’t inherit capital to fund your retirement, there are many ways to save and grow your earnings from income.
It's also possible to save on taxes by adding to your retirement savings. Your pre-tax income is used to fund employer 401(k) or 403(b) retirement accounts.
As you get into the habit of adding to your retirement savings on a regular basis, your money will grow tax-deferred in most retirement plans. Freedom from current taxes helps your money grow faster.
After you decide what you want to do in retirement, decide how much you need to accomplish your goals. Use our retirement savings calculator below to get an idea of how often and much you should save, then discuss your future with a retirement planning professional.
To use this calculator:
- enter your current age
- your anticipated retirement age
- your current savings
- your annual interest rate
- your desired amount to retire
Then press “Calc”: you will be able to print the result by clicking the “print” button. Click on “charts” to see your accumulated investment, interest growth and more.
How Much Do You Need to Retire?
This is a personal decision. Parents and grandparents may have felt financially secure in retirement with much less in retirement savings. Economic factors like inflation, currency swings, and more can cause financial market swings.
The bottom line is that it's essential to save as much as you can for retirement now and throughout your lifetime.
For instance, if you’re 35 years old now and earn about $100,000 a year, you probably already have 401(k) or other retirement accounts. If you’ve saved $200,000 today but want at least $2 million by retirement age, you can get there by saving $550 each month and earning an average of seven percent per year on the investment.
Again, feel free to use our retirement savings calculator above to have an idea of how much and how often you should save to meet your goals.
Tip 1. Save, Save, Save
Reaching your retirement savings goals means saving money at every opportunity. Nobody knows what it will cost to retire in the future. Today’s seniors are healthier and living longer.
You may need more than you predict to live well in retirement.
For that reason, save as much as possible during your work years:
- Take advantage of your employer-sponsored 401(k) plan. If you’re under 50 years old, current laws allow you to save up to $19,000 each year.
- Your 401(k) plan is a great place to save for retirement after age 50, too. You can make catch-up contributions of $6,000 a year. If your employer adds matching funds, you can save even more.
Retirement planning specialists say it’s prudent to save about 15 percent of gross income every year. If you haven’t reached this goal, increase your contribution every time you receive a pay raise.
Tip 2. Add to Your Workplace 401(k) with an IRA
Retirement investing has a variety of tax advantages. Adding a Roth IRA can increase your future tax savings while your money grows until retirement now:
- Fund a Roth IRA with “after-tax” funds.
- When you withdraw money in retirement, it is tax-free. You pay no current taxes on these distributions.
- Roth IRAs can help to hedge against future possibilities, e.g. higher taxes.
You can also open a traditional Individual Retirement Account (IRA). This decision can broaden a 401(k) retirement savings plan while giving you greater control over your investment options.
Your traditional IRA may offer greater access to investment assets not included in your workplace 401(k), including international funds, real estate investments, ETFs, and commodities such as gold IRAs. Did you know you could self-direct your IRA accounts?
Make sure to read this guide to learn why you should open a self-directed IRA.
Tip 3. Create a Savings Strategy Now
Never allow the markets to unbalance your retirement plan. Choose your retirement savings plan allocation, then maintain it even when markets rise and fall.
Failure to rebalance your portfolio can unwittingly put too many eggs into one type of asset.
If your asset allocation includes equities, debt, and cash/cash equivalents, you’re spreading the risk by diversifying the portfolio. If stock markets soar or interest rates sharply decline, it’s financially prudent to rebalance.
Use dollar-cost averaging, too. By regularly investing a fixed amount into assets in good markets or bad, your portfolio is ready to grow. Consult your financial advisor with questions about rebalancing and dollar-cost averaging.
Tip 4. Don’t Get Emotional
This is a big challenge for many investors. Even seasoned investors fall prey to their emotions.
Don’t let your emotions guide your investment decisions:
- When markets rise, it’s human to want to put more money in stocks.
- When markets fall, it’s also human to want to sell stocks and bonds.
- Time in the market is widely considered to be more important than market timing. It’s impossible to know when stocks will rise or interest rates will fall.
Unfortunately, emotional tendencies can prompt you to do the opposite. Once you build a sensible retirement plan, stay invested.
Tip 5. Get Insurance for an Uncertain Future
Although you can add insurance company-guaranteed products to your retirement plan, adding disability or long-term care insurance to your financial plans may help you to answer questions that start with “What if?”
Insurance products can help you and your heirs to pass less in taxes, too. With enough protection in place, focus on building up your retirement savings to the max.
You’re Between the Ages of 50 and 64
As you approach retirement, it’s possible to add more details to your retirement goals.
You started to build your retirement savings years ago to reach your dreams. It’s time to fine-tune your retirement savings to reach your comfortable retirement reality.
Tip 6. Make Catch-Up Contributions to Your Retirement Savings
Maximize your contributions to retirement plans before retirement. Make any catch-up contributions to your IRA or 401(k) accounts. Your employer’s matching funds can add even more financial appeal to this strategy.
Tip 7. Think About Retirement Account Consolidation
If you’re like many people, you have several retirement accounts. Perhaps you changed jobs and have multiple 401(k) accounts. It’s challenging to manage these accounts and, as you prepare for retirement, rolling over these plans to a single account can make sense.
If you’re paying annual fees for any of these accounts, please discuss your best strategy to invest and prepare for retirement with an advisor. Costs and fees subtract from your investment returns.
Tip 8. Protect Your Health & Discuss Long-Term Care
Stay healthy to build up your retirement savings for as many years as possible. Healthcare costs are high and trending higher. According to the Employee Benefit Research Institute, the average man/woman needed $130,000/$146,000 in the bank to cover retirement healthcare expenses.
Medicare currently covers 80 percent of costs. Contribute to your employer’s health savings plans (HSAs) to lower your taxable income. As above, check individual health insurance coverage.
According to federal statistics, almost 70 percent of retirees will require long-term care after age 65. It may be financially prudent to buy long-term care policies to pay for the future need for in-home or skilled nursing care.
Tip 9. Plan Your Retirement Income Now
It’s not too soon to discuss how much income you will draw over 30+ years of retirement. Start planning today. Adjust investments to prioritize regular income streams.
Tip 10. Adjust How You Invest
Consider your investment style, outlook, and risk tolerance now. Your perspectives and priorities may have changed over time.
Capital preservation may be more important to you as you approach retirement. Keeping your wealth is as essential as growing it was in earlier years.
You’re Age 65+
Tip 11. Reassess Your Retirement Goals
Discuss your plans for retirement with a financial advisor. It’s never too late to adjust or better align your retirement savings with your current financial needs.
Create a Retirement Spending Plan
Some financial advisors recommend withdrawing no more than four percent of your retirement savings each year. However, emergencies or the unexpected can create the need to revise your plan.
Create a spending plan or withdrawal rate that matches your financial needs in retirement.
Tip 12. Consider the Impact of Taxes on Your Retirement Savings.
The decision about how to withdraw from tax-deferred and taxable investment and retirement savings accounts – which to draw from first, etc. – will determine your tax bill. The decision also affects how long your retirement savings last.
Most financial advisors recommend it’s often best to use taxable accounts before tapping tax-advantaged retirement savings accounts, especially if you believe taxes are rising.
Since everyone’s financial plan is different, discuss the possible tax impact of simultaneously drawing from several retirement savings plans.
Tip 13. How to Make Retirement Savings Last
Some retirees automatically shift the bulk of their retirement savings to fixed income, cash, and cash equivalents in retirement.
Tip 14. Don't Stop Growing Your Retirement Savings
Depending on market conditions and interest rates, this can be a costly decision.
Often, it’s a good decision to invest more conservatively as you approach or enter retirement. You have less time to rebuild after downturns. However, it’s still important to protect your purchasing power from inflation.
Retirement can last decades, and it’s essential to make retirement savings last throughout your life. For that reason, plan for your retirement savings to continue to grow as long as possible.
Tip 15. Increase Your Retirement Income in Retirement
It’s always possible to increase your retirement income stream by prioritizing income and dividends in your portfolio. Discuss the addition of dividend stocks now.
Prepare to Live Long in Retirement
Building up your retirement savings for your later years is essential. It’s common for many investors to plan for the first 10 years of retirement. They want to take part in activities or travel.
You may not want to travel or participate in an active lifestyle in your 80s, 90s, or 100s. Prepare to live long in your retirement years by preparing for retirement now.
Building your retirement savings is the first part of an important life plan. Once you get into the habit of regular saving for retirement, don’t leave your investment decisions on autopilot.
As you can see, priorities and preferences can change over the course of your life. Assess and adjust your retirement savings plan goals regularly to stay on track. You can live the life you want in retirement.