You’re probably well aware that if you don’t make an effort to save for retirement, you may be forced to live on Social Security alone when you’re older. And that could mean living frugally to an extreme.
The average Social Security recipient today collects just $1,907 a month, or a little less than $23,000 per year. Granted, if you’re far from retirement, the average monthly benefit (and yearly benefit) is likely to be much higher by the time your career wraps up due to inflation and cost-of-living adjustments.
The point, however, is that it’s important to bring savings with you into retirement. And in that regard, many people have work to do.
Recent Motley Fool research found that the median retirement savings across U.S. households was $87,000, as of 2022. For a 20-something or 30-something household, that’s not terrible. But for older households, that figure is worrisome.
If you’re looking to boost your retirement savings, you don’t necessarily have to go to the extreme of working a 20-hour-a-week side gig or denying yourself all non-essential expenses to grow your 401(k) or IRA. Rather, these simple moves could be your ticket to more savings — and more options in retirement.
1. Save your raise every year
Many companies have a policy of giving out cost-of-living raises year to year, the same way Social Security benefits are eligible for an annual cost-of-living adjustment. One thing it pays to do is save your entire raise from the very start of the year — before you get used to having extra money in your paycheck. That way, the additional money you’re saving is money you won’t even miss.
2. Claim your full 401(k) match
Many employers offer a match of some sort in their 401(k). You may not be in love with your company’s retirement plan because it lacks investment choices or charges high fees. And if that’s the case, you can make an IRA your main retirement savings vehicle. But at the very least, put enough money into your 401(k) to claim your employer match in full so you’re not giving up so much as $1 for your retirement.
3. Time your departure from your employer strategically
Some employers with a 401(k) match impose a vesting schedule. Yours could mean that you’re not entitled to your full 401(k) match until you’ve been with the company for a specified period of time.
If you’re thinking of leaving your job, read up on your vesting schedule and time your resignation accordingly. It may be that waiting two or three months to leave could enable you to walk away with thousands more in your 401(k).
4. Bank any windfalls that come your way
During the year, you may come into extra money, whether in the form of a tax refund, bonus, commission, or even a gift. That’s money that can all go into your long-term savings. And if you think random contributions won’t make a huge difference, consider this: If you put an extra $200 you get as a holiday gift into your IRA at age 25 and invest it at an average annual 8% return, which is a bit below the stock market’s average, it’ll be worth over $4,300 by the time you turn 65.
To be clear, the money that goes into your IRA needs to be earned income. But this advice assumes that you work and earn money, and a $200 gift allows you to allocate $200 more from your paycheck toward retirement savings.
Boosting your nest egg is something you might feel the need to do. Before you make yourself miserable in the course of increasing your IRA or 401(k) contributions, see if these relatively painless steps do the trick of helping your savings get to a better place.