A blueprint for success that anyone can follow.
Retirement planning is for everyone. You’re never too young or too old to get started. You may have your financial future in mind as you prepare for a new year in 2024. Planning for life after your working career can seem daunting.
But everyone can take action to make it easier on themselves. So keep these five retirement savings hacks in mind. They could significantly impact your financial fortune this year and beyond.
Hack #1: Create a budget
Personal finance can seem complex, but it ultimately boils down to the simple math of what you make minus what you spend. You can’t save for retirement if you don’t have any money left at the end of each month.
Making a budget is a powerful hack that will give you visibility into where your money goes and accountability when money goes to places it shouldn’t. Are your pockets empty at the end of the month, but you’re spending $200 at the bar every weekend? You might want to rethink that equation.
Hack #2: Grab your match
An employer-sponsored retirement plan such as a 401(k) is available to most working people in the United States. Many plans offer an employer match designed to encourage people to save money. This is free money. If your 401(k) has a five percent match, it means that every dollar you contribute, up to five percent of your annual salary, will be matched by another dollar from your employer.
In other words, this is essentially doubling your out-of-pocket money before you even get started. An employer match on a steady and healthy contribution plan can have a powerful compounding effect over time, so don’t leave that money on the table.
Hack #3: Do you have a Roth IRA?
After getting the match on your 401(k), consider whether you qualify for a Roth IRA. It’s an individual retirement plan with contribution and income rules to prevent high-earners from abusing its potent privileges. With a Roth IRA, you contribute taxed income (take-home pay) but can withdraw it, and your investment gains tax-free when you retire.
This is especially crucial for young savers with decades to let their investment returns compound. Most of your Roth IRA’s value might be investment gains by the time you retire, and you’ll pay no taxes on it. It’s one of the few ways to (legally) get out of paying taxes.
Hack #4: Cut up those credit cards
Consider paying off any outstanding credit card balances you may have. Despite the temptations of getting points or cash back on purchases, credit cards routinely charge you 20% interest (or higher). Consider that the average stock market return is ten percent annually, meaning that carrying a credit card balance is mathematically hustling backward.
Clear out that credit card debt so you have more monthly cash flow in your budget, and then put that money to work for you, not against you. Remember, it’s easy to tell yourself you’ll keep your card spending under control, but most people who invest in American Express instead are better off than those carrying a balance on their AmEx card.
Hack #5: Systems build success
We are all human, and there will always be temptations to deviate from the plan. Sometimes, unfortunate circumstances force us to. The best defense against falling off the wagon is to build a system that takes the decisions out of sight and mind.
Consider automating deposits into your investment accounts and setting up auto-pay for bills you can budget. The fewer times you manually handle something, the fewer chances for something to go wrong. If you pay yourself first, you can relax knowing that what you have left can be spent guilt-free because you took care of business first.
