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8 Tips to Increase Your Monthly Retirement Account Contributions

8 Tips to Increase Your Monthly Retirement Account Contributions
(David Gaylord/Dreamstime)

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Sunday, 01 April 2018 07:57 AM Current | Bio | Archive

You’ve heard the saying, “Every little bit helps,” haven’t you? This truism certainly applies to saving and investing. Thanks to the principle of compound interest, savings tend to grow over time. The longer the time frame, the greater the growth (The story is much different over shorter time frames due to market volatility and other factors).

When you look at it this way, it’s hard to argue against saving as much as your budget can bear. But that’s easier said than done when you have dozens of other expenses clamoring for your attention. It’s all too tempting to treat your retirement account as an afterthought, especially when your career has years left to run.

Resist that temptation, you must. If you follow these eight tips, it shouldn’t even be that hard.

1. Take Advantage of Your Employer Match

Does your employer offer a tax-qualified retirement plan, such as a 401(k)? If so, it’s a cinch that you should sign up. While you’re at it, make sure you’re taking advantage of your employer’s “match” — the contribution they make on your behalf, out of their own funds. Generous matches are dollar-for-dollar, meaning your employer contributes $1 for every $1 from your gross pay.

2. Work with a Professional

Research your investment adviser options and reach out to qualified candidates at your earliest convenience. Even if you’re fairly financially savvy, an adviser can help you see what’s hidden right in front of your eyes — whether it’s a novel market strategy that you haven’t tried or a new way of thinking about how to allocate your assets.

3. Use Technology to Automate Your Savings

Do you use a budgeting or savings app? If not, download one — it’s likely free or cheap and can help you save and spend a lot more efficiently. While you’re at it, use your bank’s automatic transfer tools to schedule regular deposits into your savings. Set a manageable but aggressive recurring deposit — say, 5% of each paycheck.

4. Make One Manageable Sacrifice Each Month

Sacrifice is hard — that’s the whole point. But some sacrifices are more manageable than others. Identify and follow through on one sacrifice each month: perhaps forgoing your morning latte, or scaling back to just one restaurant or take-out meal per month. (Hey, everyone loves a good cook!)

5. Avoid Credit Card Debt

Credit cards have their place, but it’s generally better not to run month-to-month balances if you can avoid it. Avoid credit card mistakes that’ll land you in debt. The notable exception: Cards with low APR teaser rates for new accounts. If you need to finance a large purchase or pay down a high-interest balance from another card, teaser rates can be financial lifesavers.

6. Look for Recurring and One-Off Side Income Opportunities

Exercise your talents — or a long-held passion — as a freelancer. Even a few extra hours per week add up. Or look for one-off opportunities, such as cleaning out your attic and holding a yard sale.

7. Accelerate High-Interest Debt Payments

This strategy won’t pay off right away. For a time, it may actually crimp your liquidity and limit what you can comfortably contribute to your retirement accounts. But it’ll free up much-needed capital over the long term. Student loans are probably the highest-value high-interest debt target; ditto for adjustable-rate or balloon mortgages, whose rates may rise over time.

8. Take Advantage of Special Circumstances

Talk with your investment adviser or do some research on your own to determine what special circumstances, if any, might apply to your retirement plan. For instance, if you’re over age 50, you can make additional “catch-up” contributions to certain tax-qualified retirement accounts. If you’re a high earner, you may qualify for back-door Roth IRA conversions, an advanced tactic that helps circumvent Roth IRA contribution limits.

What’s life if not one long string of tomorrows? Sooner or later, those tomorrows run out. When you’re 25 or 30, the day when you hang up your hat for good might seem impossibly distant, but it’s coming — sure as the sun will rise, well, tomorrow.

You owe it to your future self to be prepared. And if you follow enough of these tips, you might just be prepared enough to hang up your hat a few years earlier.

Richard Agu is a researcher, entrepreneur and freelancer, passionate about entrepreneurship and self-development. Currently, Richard writes for Entrepreneur.com, Goodmenproject.com, among others. Follow him on Linkedin.com by clicking here now.

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RichardAgu
You owe it to your future self to be prepared. And if you follow enough of these tips, you might just be prepared enough to hang up your hat a few years earlier.
tips, increase, monthly, retirement, account, contributions
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Sunday, 01 April 2018 07:57 AM
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