Road to financial success © iStock

Do you have access to a 401(k) plan but fund it only up to your employer’s match? That’s a bit like acquiring a 651-horsepower Ferrari but limiting its use to occasional trips to church.

To see that tax-advantaged savings machine really perform full throttle on the retirement straightaway, you have to put pedal to metal. That means using a pair of features that can turbocharge your retirement:

  • First, save beyond the employer match, to the maximum of your ability.
  • Second, increase your savings with every pay hike, or each year you work.

The key is thinking about your future self, says Lynnette Khalfani-Cox, personal finance expert and co-founder of

“Trust me when I say the future you is going to be super happy you did a number of financially savvy things early in your career,” she says. “One of the single biggest gifts you can give your future self is contributing as much as humanly possible to your 401(k) at work.”

3 reasons to supercharge your retirement savings

The tendency to contribute only up to the employer match is a mistake for several reasons:

  • It limits the taxable benefits reaped. Putting money into your 401(k) reduces annual income by the same amount, yielding the fairly immediate benefit of a lower tax bite next April 15.
  • The more you funnel into your 401(k) early, the more you’ll leverage the power of compound interest over the long, but not endless, road ahead.
  • The more you save now, the more you can take advantage of multiple alternatives later, Khalfani-Cox says.

And you’ll want those alternatives. For instance, right now, you might like to backpack the Andes, get trained for a great opportunity or take time off from work and kick back.

Why it makes sense to “save ’til it hurts.” Chart shows how much can be accumulated at 3 savings rates: 6%, 10% and 15%. Assumptions include a $40,000 starting salary, 3% raises each year, a 40-year career and an 8% investment return. Calculation does not include the effects of inflation.

Do you seriously think your future self will want anything different, other than maybe a lighter pack while ascending Machu Picchu?

“You open up more options for yourself,” Khalfani-Cox says. “This can help you with early retirement, help you travel more, help you establish your own business. And if you’re not in a position to contribute later, you’ve done it early.”

A good kind of pain

Advisers urge “saving till it hurts.” If you fund your 401(k) until your eyes well up with tears, there’s a way to set aside even more. It’s the escalator provision, which steps up your default contribution automatically.

“These escalator provisions are not based just on pay increases, but also on how long you’ve been with the organization,” Khalfani-Cox says. “Many of us tend to set it and forget it. This is one area you don’t want to set it and forget it. … It protects against laziness, procrastination and inertia.”

Plus, it curbs the tendency to increase lifestyle spending as your income rises.

If you savor the image of a Ferrari adorning your driveway — or any retirement dream reached decades from now — don’t just drive your retirement savings. Turbocharge them. Says Khalfani-Cox: “It’s about pushing beyond your boundaries and self-imposed limits.”