Workers coming up short on retirement funds aren’t alone. A Bankrate-commissioned survey by GfK Roper shows that only three in 10 workers expect to have enough to retire comfortably. Fortunately, you don’t have to be one of the other seven. Here are five ways to boost your retirement savings.
The biggest helping hand you can give your retirement fund is time. Thanks to the magic of compounding, employees who sock away regular amounts annually starting at age 25 can amass twice as much by retirement as employees who start just 10 years later, assuming the same regular contribution amounts and annual returns.
Max out the match
Employees who work for firms that offer a company match on 401(k) contributions can get free dollars just for doing what they should already. Here’s an example using Bankrate’s 401(k) savings calculator: A 30-year-old employee earning $50,000 per year contributes $5,000 annually to a company 401(k) plan; his employer matches 50 cents on the dollar up to 6 percent of pretax income, or $1,500 in this case. Assuming an average annual return of 8 percent for 35 years, the employee will have nearly $270,000 more with the company match than without it.
Fees can eat up your account. Even a simple 1 percent fee can reduce your retirement savings up by up to 25 percent over 35 years. To make sure your plan is paying you, and not vice versa, investigate your advisory, management and distribution fees and check out Bankrate’s story on how to curb retirement plan fees.
Make it automatic
Out of sight, out of mind? A study by NACHA — The Electronic Payments Association, shows that those who have funds automatically deposited in a savings vehicle save an average of $90 more per month than those who don’t.
Let it be
To truly boost your retirement savings, leave it alone. That means keeping it in a 401(k), 403(b), IRA or other retirement plan until it’s time to quit working for good. While pulling funds out to buy a house, pay for college or finance a hardship can be tempting, it can punch a serious hole in your savings strategy. This Bankrate story offers seven alternatives to tapping retirement funds.