Making room in your budget for retirement savings is a smart financial move at any age, but how much should you be saving each month? In July 2012, Sen. Tom Harkin, D-Iowa, stated in a report, "The Retirement Crisis and a Plan to Solve It," that Americans are not saving enough, citing the retirement income deficit having reached $6.6 million. At the time, Harkin said 50 percent of Americans had less than $10,000 in savings. If you’re looking to power up your savings plan and contribute more to your retirement fund this year, you’ll need to reorganize your budget and find ways to supplement your income to make larger contributions.
1. Maximize your 401(k) benefits. Many companies offer an employer-sponsored retirement plan – most commonly a 401(k) – but a number require you to enroll and be consistent with your contributions. Review your employer’s retirement plan benefits, and make sure you’re contributing the highest possible amount each month. Some companies offer to match part of your contribution, in which case it’s especially important to take advantage of their retirement plan. (The typical match on a 401(k) is 50 cents on the dollar for up to 6 percent of your salary.)
2. Automate your savings contributions. If you have a hard time saving money each month, reorganize your budget so that your retirement savings contributions are categorized as expenses. Set a specific goal, and make sure you are paying this “expense” each month. Be realistic about how much you have available as disposable income, and set aside some of that money for your retirement fund.
3. Scale back on everyday expenditures. Take a close look at your current expenses, and think of ways you can cut costs. Whether it’s scaling back on how often you eat out or spending less money on clothes, set a weekly budget so you aren’t spending more than you need to.
4. Pay off high-interest debt. One of the best financial moves you can make is to pay off high-interest debt to lower your monthly payments. This can free up a significant amount of cash for your retirement savings. Survey your current credit card debt and loans, and pay off the ones with higher interest as quickly as possible. Not only will you be able to make larger contributions to your retirement savings account, but you’ll also be able to enjoy a debt-free lifestyle when you retire.
5. Supplement your income. Take up a side job to make more money, and put the earnings directly into your retirement savings account. Consider freelancing or telecommuting gigs that would give you the flexibility to continue working a full-time job.
6. Shop around for better fees. You may be paying more than you need to in banking and other fees just to maintain your retirement savings account. That’s all the more reason to compare plans before signing up for one. Even a little extra savings each month can add up over the course of the year.
7. Take on financial planning. You’ll need to set realistic savings goals, and put together a financial plan that will give you confidence in your investing and budgeting strategies. Consider working with a financial planner or an accountant to set savings goals for the next six, 12 and 24 months. Consider the lifestyle changes you might have to make to stick to your budget, such as downsizing, changing jobs or selling property.
These decisions can enable you to save more money for your retirement fund and make it easier to reach your financial goals. A financial planner can also review your budget based on your savings goals and make recommendations on where you can cut back on expenditures.
Sabah Karimi writes for Yahoo and Wise Bread, where you can find more retirement tips..