Need to increase your retirement plan contributions? That is how. | Smart Switch: Personal Finance

(Maurie Backman)

Saving for retirement is important. But let’s face it, it’s not always easy or fun.

To consistently fund a 401(k) or IRA, you will probably have to give something up. That something might be a better car, a much-needed vacation, or home maintenance you’d like to outsource.

But the reality is that planning retire with only social security It’s a bad idea. Those benefits will only replace about 40% of your paycheck if you have average income, and most seniors need more than 70% to 80% of their pre-retirement income to manage their expenses well.

This is especially true these days given the way inflation is soaring. In fact, many seniors who get all or most of their Social Security income today are struggling financially thanks to higher costs at the pump, the grocery store, and just about everywhere else. But those with savings to draw on are certainly doing better.

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If your retirement savings aren’t progressing as you think they should, you’re in good company. In a recent Paychex poll, 73% of workers admitted that they should save more for retirement. But 79% also said they can’t afford to increase their 401(k) or IRA contributions.

If that’s the boat you’re in, you may have more options for building your savings than you think. Here are some to explore.

1. Make sure you claim your full 401(k) match

Are you contributing enough to your 401(k) to take full advantage of your employer’s matching program? That’s probably the easiest thing you can do to increase your savings, so see what your matching incentive looks like and change your spending as needed to snag that match in full.

Maybe your employer matches 100% of contributions up to $3,000, and you’re currently putting $2,400 into your 401(k). If he manages to increase his contributions by just $50 per month, he will effectively double that effort by claiming his full match.

2. Get an extra hustle

The informal economy is booming these days, so there are plenty of flexible side jobs available that could give you a nice boost in income. And since that’s money you’re not used to living with, you should possibly be able to use all of it to fund your retirement savings.

Remember, if you put money into a traditional 401(k) or IRA, your contributions are made on a pre-tax basis. So if you earn $2,000 from a side job, you can dump that entire $2,000 into your retirement plan.

3. Give up one little thing (or more, if you’re willing)

You may have heard that giving up store-bought coffee every day will help you retire a millionaire. It’s probably not true. But giving up a small luxury could help you significantly increase his savings.

Imagine you decide to start making your own coffee, freeing up $50 a month for your retirement savings. If you put an extra $600 into your 401(k) or IRA this year, leave that money alone for 30 years, and invest an average annual return of 8% (which is a bit below the stock market average), you’ll increase your savings over $6,000.

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Of course, you might think that $6,000 isn’t a lot of money in the grand scheme of retirement. And to be fair, it’s not. But that’s the shock of cutting alone a expense for a year. And if you’re willing to cut more spending over a year or several, the impact could be much more significant.

It’s important to have income outside of Social Security once you retire. If your savings need work, follow these tips to build your savings and avoid future financial stress.

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