Your retirement account may seem straightforward enough. You simply sign on the dotted line, accept the contribution rate, and move along, slowly collecting money as you go, right?
While that laid-back approach will propel you forward to some degree, chances are it won’t be fast enough to get you to where you need to be when faced with retirement.
While the amount of money you’ll need to survive (and thrive!) during your golden years depends on factors like your current income, anticipated retirement lifestyle, and expected healthcare costs, experts say most people should plan to spend between 55 to 80 percent of their annual income every year throughout retirement. And that’s before you factor in other less controllable elements like rising life expectancy and inflation.
And unfortunately, as a whole, Americans aren’t saving enough to cover these expenditures. In fact, the median retirement savings account for those ages 55 to 64 has a balance of just $120,000—less than $1,000 per month for a 15-year retirement. Even more troublesome: One in four Americans haven’t saved for retirement at all.
In a way, it’s understandable: Retirement is an abstract idea—something years and years in the future, and there are more immediate financial needs. But saving for this period of your life is crucial to your overall well-being later.
The good news? You can take the reins on your financial future without feeling a significant sting. (Yes, even if you’re already on a tight budget.) Here are some smart, expert-approved moves you can make now to fund—and maximize—your retirement accounts over time.
1. Take advantage of matching policies
If your employer has a matching program, make sure you take full advantage of this—it’s essentially free money. Typically, these programs max out around 6 or 7 percent.
And don’t change jobs until you’re fully vested—the point in time when you become fully entitled to the funds you received. This time period varies from employer to employer—some allow you to keep a portion based on years of service, while others will require you to forfeit everything.
2. Increase your contribution rate each year
Though it’s easy to set it and forget it, make it a point to adjust your contribution each year—or, at minimum, whenever you get a raise. Even just a point or two can make a difference in the long run.
Start out by making incremental increases every couple of months. You may even choose to go up just half of a percentage point. When you increase your contributions at such a slow and steady pace, you won’t have to make dramatic lifestyle adjustments, but will still be doing your future self a big favor. Remember: Thanks to compound interest, every little bit helps.
When your income changes and you have a little bit more wiggle room, sit down and reevaluate your budget. How much of that extra money do you really need? Do you need it at all? If you get used to stashing away the extra money before it hits your primary bank account, you may never miss it.
3. Put your tax refund to work
Similarly, any tax refund you get is “found money”—money you didn’t miss, because you never saw it in the first place. For some Americans, their tax refund can amount to a big chunk of change, too—in some cases, as much as a month’s worth of work! Even if you don’t save your entire refund, you could still be setting aside a significant amount. What’s more: You could be entitled to tax breaks for doing so.
4. Bank your bonuses
Are you entitled to yearly bonuses or overtime? If you’re lucky enough to have this workplace incentive, use it to your advantage. Since this income isn’t part of your standard pay structure, chances are it’s not money you depend on to help you pay today’s bills.
Once you’re taxed on these funds, put some—or all—of that surprise money into your retirement accounts to let it grow over time.
5. Invest your spare change
There’s an app for that, and it’s called Acorns. This clever platform automatically rounds up any purchases you make to the nearest dollar. Then, you can invest that money into an investment account or an IRA.
Sure, you’ll have to spend money to get money. Acorns does charge a small monthly fee (we’re talking $1 to $3 per month, depending on the plan you choose), but it greatly simplifies the process. And chances are, incremental withdrawals to the likes of .24 cents here and there won’t hurt much.