#1 Way to Boost Your Retirement Savings. Every. Single. Year
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#1 Way to Boost Your Retirement Savings. EVERY. SINGLE. YEAR
Most people know the importance of saving for retirement. However, it isn’t enough to open a 401(K) or an individual retirement account (IRA). For a comfortable retirement, you need to save early and you need to save enough.
There are no hard or fast rules on how much to sock away per year. But according to some experts, you should aim to save at least 15% of your yearly income as soon as you can. If you can’t do this, something is certainly better than nothing.
Understandably, some people are unable to hit this target. But even if the amount you’re currently saving is far less, you can aim to increase your contributions as your income allows.
According to a 2021 Bankrate survey, “more than half of Americans are behind in saving for retirement, and 16% aren’t sure whether they are on track or not.”
There’s no way to know with “absolute certainty” how much you’ll need to comfortably retire. Even so, a general rule is to have 25X the amount you expect to withdraw from your retirement account each year. So if you plan to withdraw $50,000 annually, you’ll need about $1.2 million.
Saving a larger nest egg can seem overwhelming, especially if you’re behind or contributing a small percentage of your income. However, among the different ways to catch up on saving, one strategy involves increasing your retirement contributions by at least 1% at regular intervals – until you reach your goal.
Let’s say you earn $50,000 annually and you’re currently saving 2% of your income for retirement ($83 a month). To save more, seriously consider boosting your contributions to 3% (about $125 a month). Allow yourself time to adjust to this higher amount, and then increase your contributions by another percent in about six months. The good news is that many plans allow participants to change the amount of their contributions at any time.
A 1% increase might seem insignificant, but it can make a big difference over 30 or 40 years.
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