Tips to Increase Your Retirement Savings at Any Stage of Life

If you start saving for your retirement from an early age, there is no doubt that you can save more and make a big difference. However, you can save for your retirement at any stage of life. There are still plenty of ways to build a solid nest egg at every step, and if you implement the right strategies, you will be able to follow through easily.

However, it is still advised to consult with a financial advisor so you understand the best ways in which you can start saving for retirement. This article will also offer practical tips on how to start saving for retirement to get you moving in the right direction.

Below are 5 tips to increase your retirement savings at any stage of life:

1. Use your workplace 401(k) retirement account

A 401(k) is a workplace, employer-sponsored retirement account that can be beneficial at all life stages. For young professionals, a 401(k) account is often one of the first investment options available to them. Moreover, it is easy to use, which makes it a great starting point. Since your employer offers the plan, you do not need to look around for investments on your own. You can invest in different options within the same plan. 401(k)s usually offer diverse investments like mutual funds, index funds, bond funds, stocks, etc. Moreover, one of the biggest advantages of a 401(k) is the employer match. Many companies offer to match a percentage of your contributions, which adds more towards your retirement savings over the years. For example, if your employer matches 50% of your monthly contribution, putting in $10 would mean an additional $5 from them. This can boost your retirement fund by 50% without any extra effort on your part. Say you earn $30,000 a year and contribute $1,000 to your retirement plan. An employer match of 50% of your salary means your employer would add another $500. So, with a $1,000 contribution from you, you will get an additional $500 from your employer, bringing the total to $1500. The employer match is a unique benefit, and you can benefit from making the most of it by contributing at least enough to get the entire match.

Another significant advantage of a 401(k) is the relatively high contribution limit. For 2024, the Internal Revenue Service (IRS) allows you to contribute up to $23,000 annually if you are under 50. So, you can build up your retirement fund faster than with most other retirement accounts. And if you are 50 or older, you can make an additional catch-up contribution of up to $7,500. This allows you to contribute up to $30,500 per year. This high contribution limit is beneficial if you are starting to save later in life or if your retirement savings goal still seems far off. The high limits and consistent savings can make it easier for you to overcome any savings shortfalls and give your retirement fund a substantial boost. Another key benefit of a 401(k) is its tax advantages. Your contributions are typically made from your pre-tax earnings, which reduces your taxable income in the year you contribute. So, you are not only saving for retirement but also lowering your tax bill in the short term. If you consistently save in a 401(k) across different stages of life, you will benefit from tax advantages all throughout, which can lead to substantial long-term savings. The money in your 401(k) also grows tax-deferred, and you only pay taxes on the gains when you withdraw the funds, which is typically in retirement when you may be in a lower tax bracket. The tax-deferred growth, along with the other benefits, helps you increase your savings over time, no matter your age.

2. Consider increasing your income sources

Building multiple income streams can be a smart move at any stage of life. Relying on a single source, like a job or business, can leave you vulnerable in times of unexpected financial challenges, such as a job layoff, business downturn, or economic and consumer shifts in the market. On the other hand, diversifying your income sources helps you create more financial stability. It allows you to cushion yourself and your family against financial emergencies. Fortunately, there are many ways to increase your income sources. For starters, you can consider taking on a part-time job or side hustle that works with your schedule. You can take on a freelance project, consult in your area of expertise, or take on hourly work. These side jobs are flexible and can be accommodated in your schedule. Moreover, not only do they add to your earnings, but they can also help you network. If you are a business owner, you can consider expanding into a complementary domain to diversify. For instance, if you own a grocery store, you might consider opening a related business like a car wash or a small café nearby. This way, even if one business faces challenges, you will have another source of income to rely on.

Creating passive income streams can also help you earn more without needing to dedicate additional time each month. Rental income, for example, is one of the most popular passive income sources. Purchasing a rental property, such as a house or commercial space, and leasing it out can generate steady monthly income. Although commercial rentals can offer higher returns, they can also come with higher costs, so it is essential to understand the risks before plunging in. If you are creatively inclined, you can explore passive income opportunities in the form of royalties. Writers, musicians, and artists can earn royalties by publishing books, composing music, or licensing their artwork, such as paintings or sculptors. For example, each time a book sells, or a song is streamed or downloaded, you could earn a percentage of the revenue. In today’s digital age, affiliate marketing has also become a popular way to earn passive income, especially if you have a social media presence or blog. As an affiliate marketer, you have to promote products or services made by other companies. You earn a commission every time a customer buys something through the referral link you add on your profile. You can add affiliate links to your blog or social media posts and generate additional income while sharing product ideas. This method is especially beneficial if you already have a following, as it allows you to monetize your online blogs and profiles without having to create your own products or services.

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3. Be smart with your money

No matter your age, you must be smart with your money to keep your savings growing. Smart money habits go a long way in helping you live comfortably now while setting aside enough funds for the future. This may include a multitude of things like avoiding overspending, managing your debt wisely, automating your savings, and making intentional and wise choices with your earnings. Adopting these habits at any stage can pay off. Here is a breakdown of a few of the approaches you can adopt:

• First, keep a close eye on your spending. Overspending, especially on non-essential items, can quickly eat into your savings potential. Being mindful of your expenses is a habit worth building in your 20s as well as later in your 40s and beyond. Small changes, such as resisting impulse purchases or not using shopping as a stress reliever, can lead to better savings over time. It also helps you build a healthier outlook on money and material purchases.
• Next, you must keep your debt under control. Unnecessary debt, like high-interest credit cards or loans for luxury items, can be a serious issue in your financial journey. It can be impossible for most people to eliminate debt completely, but you can focus on good debt. Good debt helps you build an asset, such as a mortgage to buy a house. This is different from taking on loans that finance depreciating assets like a luxury car. You must carefully differentiate between depreciating and non-depreciating assets as well as liabilities to make mindful choices regarding debt. Recognize that a home can appreciate over time while a new car typically loses value.
• Automating your savings can be a game-changer, too. You can simply keep all your accounts on automation to ensure you are saving and investing for retirement first and spending later. With your retirement contributions happening automatically, staying consistent and building a substantial fund without worrying about manual transfers is easier. With manual transfers, you have to set aside money every month. In most cases, you may not transfer the same amount as you may be tempted to spend elsewhere. In some cases, you may also forget or delay your savings and investments for other priorities. Automation helps ensure that you prioritize your long-term goals over short-term wants.
• Finally, remember to make good use of any extra earnings. There may be several times in your life when you may earn additional money apart from your monthly salary. This can include a work bonus, an inheritance, or even a lottery win. Using this money strategically can make a big difference. Instead of spending it all on non-essential goods and services for instant gratification, consider putting part of it toward your retirement or future needs, also known as delayed gratification. You can use the extra money to contribute towards your 401(k), invest in the stock market under the guidance of a financial advisor or save in a high-yield savings account. You could also use extra funds to pay down debt.

4. Open a Roth Individual Retirement Account (IRA)

A Roth IRA can be an excellent addition to your portfolio. If you already have a 401(k), a Roth IRA can provide tax diversification and allow you to withdraw tax-free income in retirement. And if you do not have access to a 401(k), a Roth IRA is an excellent way to establish structured retirement savings. In 2024, you can contribute up to $7,000 annually to a Roth IRA if you are under 50. The contribution limit is higher for those 50 and older, at $8,000, thanks to the catch-up contribution. Although these limits are lower than a 401(k)’s, they still offer a smart way to build retirement savings.

Unlike traditional retirement accounts, contributions to a Roth IRA are made with after-tax dollars, so you will not owe taxes on qualified withdrawals in retirement. This can be helpful in creating a diversified tax structure for your retirement, as it ensures you will have at least one source of tax-free income in retirement. Another advantage of a Roth IRA is that it allows more flexible access to funds if needed. You can withdraw your contributions but not the earnings at any time without penalties or taxes. So, you have a financial safety net if unexpected expenses arise before retirement.

5. Consult a financial advisor

One of the best ways to save for retirement is by consulting with a financial advisor. Every stage of life requires a different approach, so hiring a financial advisor can help you adopt and implement the right strategies. Financial advisors can help you avoid mistakes and make the most of the opportunities suitable for your age, risk appetite, and future goals. They can be helpful in a number of ways, from selecting suitable investments to deciding on the correct investment values. They can also help you focus on lowering debt and making sure your additional income sources are wisely used. Moreover, financial advisors not only help before you retire but also later. They can guide you on tax-efficient investing, help you plan for long-term care, and assist in developing withdrawal strategies that ensure your savings last for as long as you live.

To conclude

Saving and investing for retirement is a lifelong journey, but the earlier you start, the better. However, you must also not neglect it in the later stages of life. The tips shared in this article can be implemented at any stage of life, whether you are just starting or need to catch up a few years before you retire. If you are behind, adopting these strategies can help you build momentum and improve your financial situation. If you are already on track, you can maintain these habits to ensure you stay focused and continue to make progress without any setbacks. However, the most crucial step is to consult with a financial advisor. Personalized advice from an expert can help you make the right decisions and adjust your retirement plan as your life evolves and you grow old.

Use WiserAdvisor’s free advisor match tool to get matched with seasoned financial advisors who can give you personalized tips on retirement investing and saving. Answer a few simple questions and get matched with 2 to 3 vetted financial advisors based on your requirements.

For additional information on retirement planning strategies that can be tailored to your specific financial needs and goals, visit Dash Investments or email me directly at dash@dashinvestments.com.

About Dash Investments

Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.

Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. Additionally, each client receives comprehensive financial planning to ensure they are moving toward their financial goals.

CEO & Chief Investment Officer Jonathan Dash has been profiled by The Wall Street Journal, Barron’s, and CNBC as a leader in the investment industry with a track record of creating value for his firm’s clients.