When it comes to retirement planning or saving, it is always better to start saving early on so that you can benefit from compound interest. However, even if you started saving late or haven’t started at all, there are several ways to boost your retirement savings and secure a stable financial future for yourself in your golden years. Keep reading to discover how to go about it.

Begin Today and Concentrate on Your Goals

If you had a late start on building your retirement savings, don’t dwell on the years you seem to have lost. Instead, focus on what you can accomplish now with your current time. One crucial factor to consider is how much you need to retire. The amount varies by individual and depends largely on the lifestyle you desire and can afford in retirement and your current earnings. 

Once you have figured out how much money you need to save based on your age, it’s time to start putting away money as soon as possible. You can work towards saving ten times your pre-retirement salary and plan to live on 80% of your pre-retirement annual income when you eventually retire. Of course, this amount can be adjusted down or up, depending on whether you have additional sources of income and your desired lifestyle.  

Look at the Different Sources of Retirement Income

Your retirement income can come from different sources. It is important to look at them and factor them into your retirement plan. One of the major sources of income is Social Security, the retirement income program administered by the U.S. government. As a worker, you become eligible after you’ve consistently paid Social Security taxes for at least ten years. The benefits you get will be based on your highest earning years.

Also, having personal investments and savings outside of your retirement plans can provide you with a good income during retirement. Typically, retirees prefer investments that can offer them a guaranteed monthly income to those that have potentially higher returns but aren’t consistent. Another way to get income in retirement is through a reverse mortgage, which can allow you to get money based on your home’s equity without having to sell or vacate the home in order to repay the loan. You can use a reverse mortgage calculator to estimate how much money you can get depending on your home’s equity. If you are interested in running your own business in retirement, this could be an excellent source of start-up capital for your venture.          

Fund Your 401(k)

Many employers in the U.S. offer the 401(K) retirement savings plan with tax advantages for employees. This savings plan is named after a Section of the United States Internal Revenue Code (IRC), and employees who sign up for them agree to have specified percentages of their paychecks paid directly into investment accounts on their behalf. Employers have the option of matching all or part of the contributions. One of the main advantages of the 401(K) plan is that it offers significant tax advantages over other types of savings. So, the money is taken from your paycheck before your income taxes are deducted. No taxes are due on the money you contribute until you withdraw in retirement.  

If your workplace offers a 401(k) plan or something similar, such as a 403(b) or 457, and you are not yet funding yours maximally, now would be a good time to increase your contributions. The maximum amount a worker can contribute to their plan is usually adjusted yearly to reflect the effect of inflation. As of 2023, the amount was set at $22,500 for people under the age of 50 years. Persons who are 50 years and older have the option of making an additional contribution of $7,500 to catch up, making it a grand total of $30,000.     

Add an IRA to Your Retirement Plan

If you are already funding your 401(k) to the max or your workplace doesn’t provide one, consider having an individual retirement account (IRA). This investing option comes in two varieties – Roth and traditional IRA. Roth IRA allows you to contribute your after-tax income. So, your money grows tax-free, allowing you to make penalty-free and tax-free withdrawals in retirement. On the other hand, a traditional IRA lets you contribute money pre-tax, so your savings grow tax-deferred. Your withdrawals are taxed as current income when you retire. 

Generally, Roth IRA is suitable for individuals who expect to fall within a higher tax bracket when they start making withdrawals. Conversely, a traditional IRA is best for people who expect to be in the same or a lower tax bracket when they start making withdrawals in retirement. As of 2023, the maximum contributions for both types of IRA plans are $6,500 for people under 50 years and $7,500 for persons who are 50 years and older.