Saving more for retirement doesn’t mean you need to live on rice and beans or feel deprived. The earlier you start saving and investing, the better off you’ll be, thanks to the power of compounding interest. It’s easy too – by making a few small changes now, you can set yourself up with a bigger balance to spend in the future.
I recently partnered with TracFone to help provide important information to consumers who are preparing (or beginning to prepare) for retirement. Here are some of my top tips to get you started:
- Save enough to max out a workplace match.
Not only does a retirement account at work (such as a 401k, 403b, or 457 plan) cut your taxes, but the automatic payroll deductions make saving even more convenient.
If your employer matches your contribution, that’s like winning the lottery every month, because you get free money without having to do any extra work!
Even if you can’t set aside the recommended 10%-15% of your income for retirement, always contribute enough to max out an employer match, otherwise, you’re leaving money on the table.
- Set goals for annual savings increases.
Starting this year, make it a goal to increase your savings at least 1%. Then make it an annual tradition until you eventually max out a retirement account.
Saving a little more each year makes it easy to adjust your budget over time. After a few weeks, you probably won’t even notice those additional contributions, and you can rest easy that they are going toward your future.
- Shop your recurring expenses.
Don’t forget to shop and compare services that you pay monthly, such as smartphone plans, auto insurance, and subscriptions. Switching to a less expensive option for these kinds of services through brands like Tracfone and InsuranceQuotes can free up more money to save for retirement.
TracFone is not only affordable—it also offers a variety of devices and plans that can fit into your lifestyle while helping you save. And, with no activation or cancellation fees and Unlimited Carryover* to keep any unused minutes, text and data, you can change your no-contract plan as often as your needs change, without penalties.
- Contribute to multiple retirement accounts for your situation.
Making contributions to retirement accounts gives you double benefits, saving money and cutting taxes. So, take advantage of more than one type of account when possible.
You’re allowed to max out both a retirement plan at work and an IRA for the same year. However, if you or a spouse participate in a plan at work the tax deduction for traditional IRA contributions may be reduced or eliminated, depending on your income.
- Use a health savings account (HSA) to cut taxes when possible.
An HSA is a tax-advantaged account you can set up for the sole purpose of paying medical expenses. To qualify, you must be enrolled in a qualified high-deductible health plan purchased on your own or through an employer.
If you reach age 65 and still have a money in an HSA, it morphs into something that resembles a retirement account because you’re allowed to use it for non-qualified expenses, such as food or travel.
- Automate your savings and investment contributions.
Even if you can only contribute a few dollars a month, put your retirement savings on auto-pilot. It’s easier to be disciplined when you have a system in place that you don’t have to think about.
When funds are automatically transferred from your paycheck or bank account to a retirement account, odds are you’ll be a more successful saver.
- Save all windfalls, such as a raise, bonus, gift, or tax refund.
When you receive a lump sum of cash, you have the perfect opportunity to improve your finances. Instead of going on a wild spending spree, use a windfall to increase your retirement account contributions.
- Drive your car longer to avoid a new loan.
If you own a vehicle, make it a goal to drive it for several years after you pay off the loan. A great savings strategy is to continue sending the same amount of money to a savings or retirement account.
- Create a spending plan to stay on track.
Instead of feeling hemmed in by a traditional budget, consider creating a spending plan. It’s a framework for how you intend to spend money before you ever receive it.
One popular planning approach is called the 50/30/20 rule. You spend no more than 50% of your take-home income on fixed expenses and necessities, such as housing, insurance, utilities, food, transportation, and debt payments.
In addition, you limit variable expenses, such as dining out, clothes, and smartphone plans to 30%. And the remaining 20% is for financial goals like building an emergency fund and retirement contributions.
- Curb impulse purchases by waiting 24 hours.
If you tend to get carried away with impulse purchases, there’s an easy way to break the cycle: set a 24-hour waiting rule. Creating space between an impulse and a purchase can be the key to spending less so you have more to save for the future.
