According to the Employee Benefit Research Institute, almost one-third of all Americans have less than $1,000 set aside for retirement and more than half have less than $10,000. This is surprising in light of the fact that many experts warn that your future Social Security income—a traditional form of retirement income—may not be enough. Saving for retirement, or saving more, is really not something to put off. Consider these five strategies to boost your retirement portfolio today:
If you don’t know where you are financially, you’ll have a hard time getting to where you want to be. The solution is to budget, and it’s easier than you might think. Use an online tool, such as Mint, or simply list all of your income and expenses in a spreadsheet or on paper. True, collecting your monthly statements, such as credit card and bank statements, and bills, may take a few minutes, but it’s worth the effort. Then, review your expenses to see where you can cut back, and set monthly limits for each spending category. Deposit what you save into a Roth or traditional IRA, or increase your contribution to your 401(k) at work.
According to the Department of Agriculture, the average American household spends as much as $1,200 per month on food. This means that if you reduce your food bill by 20 percent, you could save almost $3,000 per year. One good way to save is to clip coupons. Even if you don’t take it to the extreme, regular couponing can translate into serious savings. Check the Sunday paper for coupons, sign up for your grocery store’s loyalty program, and match coupons to in-store sales and incentives to get the biggest bang for your buck.
Consider reallocating the time you spend watching TV or posting on Facebook. You might consider selling unneeded items on the Internet, or even filling out paid surveys online. Or consider starting your own consulting business specializing in an area of your expertise.
Review all of your monthly bills and look for ways to cut back, including negotiating extra fees and charges. Also, use the Internet to research less expensive options for your cable TV, cell phone and other monthly services. If you’re not currently bundling, investigate this option, too.
According to the Federal Reserve, the average American carries roughly $7,000 in credit card debt, which can result in significant interest payments. Consider your credit card’s APR and the amount you end up paying every year in interest, and think how much you could save by paying off your credit card debt.
There are two chief components to saving more for retirement: One is to save more money, and the other is to actually deposit what you save into a designated retirement account. If you haven’t already, open an IRA, a Roth IRA (if you qualify), or deposit more of your income into your 401(k) at work. A great way not to be tempted to spend what you save is to set up automatic deposits into your retirement account on a monthly basis. Remember, if you make early withdrawals (before you turn 59 1/2) from a 401(k) or traditional IRA you may be penalized. However, you can withdraw certain contributions made into a Roth IRA at any time without penalty.
What other ways to save more for retirement can you share?
David Bakke is a contributor for MoneyCrashers.com. He was once buried in more than $30,000 of credit card debt, and now shares his story and tips for smart money management.