Every one of us dreams of retiring with sufficient money to pay our bills and enjoy a comfortable retirement. But saving for retirement is more difficult than it seems. It requires sacrificing other luxuries to be able to meet your retirement goals.
However, the good news is that there are simple steps you can take to increase your retirement savings and better position yourself financially for retirement. It includes the following.
Get a Full 401(k) Match
If you are among those fortunate to have access to 401(k) through work, and your employer offers a match, ensure you contribute the maximum amount required to take advantage of the match. For instance, if your employer matches up to 5% of your salary and you earn $50,000 annually, you would have an extra $1,800 saved up to your 401(k) account each year from the match. That will be an additional $54,000 saved up in twenty years.
That’s not all. Remember, the amount in your 401(k) account grows. So if your 401(k) account has a return of 7%, it means that the $1,800 you receive from your employer will grow to about $170,000 over thirty years.
Invest in stocks
Most retirement savers fear investing in stocks due to market volatility. They worry that they might incur a great loss and may never recover from it. But investing in stocks is one of the best ways to grow your retirement fund. If you are not retiring within the next few years, then consider investing in stocks, as you’ll have ample time to wither the effect of any market downturn. A stock-heavy portfolio may be risky, but it will help you grow your savings more efficiently.
For instance, from the illustration above, the $18,000 from an employer 401(k) match was able to grow to $170,000 at a 7% return rate. Imagine if the return rate was 4% (which is the typical return for more conservative investments), which means you would have only earned about $101,000.
If you aren’t experienced with stocks and are worried you might pick the wrong stocks, consider investing in index funds. They provide a simple way to invest in diverse stocks and capitalize on broad market gains without having to engage in extensive research. Index funds also have relatively lower fees, so you don’t need to be afraid of it eating into your returns.
Delay Social Security
You are entitled to Social Security benefits once you hit the age of 66 or 67, depending on your birth year. However, you are allowed to delay withdrawing your benefits, and for each year your Social Security is delayed, it increases by 8%.
This, however, ends once you hit age 70. So if you wait until age 70 before taking your Social Security, it will grow by 24%. Best of all, there isn’t any investing risk attached, as the increase is guaranteed.
The more money you are able to retire with, the more comfortable you’ll live in your retirement years. Apply these three strategies to grow your retirement fund without breaking a sweat.