With a new year underway, it makes sense to think about how you can improve your finances. One of the best things you can do for your future is to make sure you are saving enough for retirement. But the truth is that you probably aren’t tucking away enough, so increasing your retirement account contributions is probably a good idea. Here are five steps you can take to boost your retirement account contributions:
1. Make retirement saving a priority. If you want to increase the chances that you will stick to any course of action, you need to make it a priority. Think about why a comfortable retirement is important to you, and come up with reasons to stick with the plan you are about to make. You need to figure out what you want your money to do for you, if you want to create success down the road. Your very first step should be to give retirement contributions precedence over other spending.
2. Figure out how much you need to save. According to the Employee Benefit Research Institute, more than half of Americans haven’t even calculated how much money they need to save for a comfortable retirement. You need to figure out how much you will need in retirement (there are plenty of online calculators to help you with this), and then figure out how much you should contribute to reach your goal. Once you figure out how much more you need to contribute each month to meet your goal, you can make plans to increase your contributions.
3. Look at your current expenses. Now that you know how much money you should be putting toward retirement, it’s time to find that money. Your first step is to look at your current expenses. Many personal finance experts estimate that the average household wastes between 10 percent and 15 percent of its income each month. Honestly look at where your money is going. Look for the waste. Stop spending money on things you don’t need (and probably don’t want), and put that money toward your retirement.
4. Find ways to make more money. After cutting expenses, you still might not be hitting your mark. If this is the case, look for ways to make more money. This can be through a part-time job, or by starting a side job. You can even look for passive income opportunities. Think about ways that you can add a little more money to your budget so that you can increase your retirement account contributions.
5. Increase your automatic investment. Your best option for making sure that your retirement contributions increase is to automate your efforts. You can probably have your contribution automatically deducted from your paycheck. Talk to your human resources department about how you can increase your regular contributions. If your employer offers a match, this might be a good way to get a little more free money for your retirement. If you can’t have the money deducted from your paycheck, consider setting up an automatic transfer from your bank account to an IRA account. When you have your money automatically diverted to a retirement account, you aren’t tempted to spend it first. Automating the process is one of the best ways to make sure that you “pay yourself first.”
With the right planning and a little determination, you can close your retirement savings gap. Make sure that you are contributing enough to your tax-advantaged retirement account so that later you can retire in comfort.
FMF writes at Free Money Finance, a personal finance site that helps readers grow their net worth. He shares practical tips that have helped him accumulate a significant net worth and can do the same for others.