How to Accelerate Your Retirement Nest Egg
All the paperwork that comes along with tax season can be a bit overwhelming. But tax season can also be a helpful marker for retirement planning—especially since you’re already looking at all your pay stubs. Why not make the most of this yearly event and determine if your retirement savings are on track?
Building your nest egg is a lifelong process that can be greatly helped by saving the most you can. Here are four ways to step up your retirement savings and get closer to meeting the year’s maximums:
1. Use your tax refund wisely.
If you are expecting a tax refund this year, consider opening an IRA (or adding to an existing one) with that money to increase your savings with tax-free growth or on a tax-deferred basis.
2. Plan without a raise or bonus in mind
If your role allows you to receive a raise or end-of-year bonus, you may want to consider saving as though you won’t receive it. While we may expect a certain amount of money each year for a raise or bonus, things don’t always go as planned. It may help you to treat a raise or bonus not as a given, but instead as found money. Should you receive a raise or bonus (even if expected), you can use some or all of the additional funds to increase the amount you contribute to your workplace retirement plan.
3. Match as much as possible
Take advantage of any employer match your company provides with your retirement plan so you can boost your savings. Some employer-sponsored retirement plans add money to employee accounts, usually based on a specific formula. For example, if you contribute 3% of your salary to your plan, your employer may also add 3%. If eligible, a minor contribution increase on your part could mean doubling what goes into your retirement account with each paycheck. That money can go a long way toward building a comfortable nest egg that you may need to use in retirement.
4. Take advantage of catch-up contributions
Once you turn 50, you can save even more through yearly “catch-up” contributions. Each year, the additional amount that participants age 50 and older can contribute to their 403(b) or 401(k) plans changes. The bottom line: Even small increases have the potential to help you accumulate a bigger retirement nest egg.
The True Value of a Nest Egg
While the use of a nest egg may seem far away (especially for those at the very beginning of their retirement journey), you should remember that a portion of your paycheck can always be placed into your retirement savings plan. Your nest egg will only be as strong as your commitment to growing your retirement plan.