Numerous studies have found that, on average, we haven't saved enough money for our golden years. But how exactly should we go about building a bigger nest egg? Some people increase their investment risks in an effort to get higher returns. But, as we all learned during the recession, choosing more risky investments is not exactly smooth sailing to prosperity. Here are four alternative ways to increase your nest egg:
Consider 401(k) benefits when job hunting. The economy has improved enough that people are again beginning to talk about switching jobs. While most people fixate on the new salary, it’s worth asking about a potential employer's 401(k) benefit policy. With some firms not offering a 401(k) and others offering 5 percent or higher matches, this could make a huge difference to your retirement security.
Switch to a lower fee retirement account. When you change jobs, you have an opportunity to move your retirement stash into lower fee accounts. Compare the investment fees in your former employer’s 401(k) plan to those in an IRA and your new employer’s 401(k) plan. You can then roll your retirement savings into whichever of these three accounts has the best investment options and lowest fees. Seeking out low cost investments can significantly boost your chances of a comfortable retirement.
Take advantage of stock broker competition. A quick look at current stock broker promotions will show you that many online stock brokers are offering incentives to lure you to their services. If you are willing to transfer your assets from one brokerage to the next and can successfully avoid fees when doing so, you can move from company to company and reap the cash bonuses. In order for this to work, make sure you understand the terms of the promotion and that you don't pay more in termination fees from your old broker than the bonus that you are getting. You might find that you like the new business after your assets are transferred, but you can still keep the free bonus even if you end up moving on to another company.
Consider Roth IRA conversions, especially in years with low earnings. Almost everyone is worried about expenses when they are laid off. But the time you spend looking for work is a great time to consider converting some of your retirement money into tax-free money by doing a Roth IRA conversion. When you aren't working all 12 months of the year, you could potentially drop into a lower tax bracket. And you could pay this lower tax rate on the amount you convert to a Roth. You can also convert a portion of your traditional IRA to a Roth each year to avoid pushing yourself into a higher tax bracket.
David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and alerting you of new promotion codes whenever they become available.