The earlier you start saving for retirement, the better, due to compounding interest. However, it’s never too late to start or to start saving more seriously.
If you haven’t saved enough money, had to withdraw early or stock market fluctuations have caused your retirement savings to fall below $50,000, there are ways to increase your account balance.
1. Contribute More
Contributing more to your retirement accounts is the most logical way to increase your account balance. Automating your savings can help you meet your retirement goals because everything is done without thinking about it. Not able to make a big change to how much you’re saving? You can gradually increase your contributions over a few months.
Another idea is to contribute your yearly tax refund to your retirement account. Since this is money you were living without, it can be easy to deposit it into your retirement account immediately and never notice it gone.
If you need to bring in additional income to contribute more to your retirement accounts, you could try these tips:
Ask For a Salary Raise
If you get a salary increase, you could contribute the additional money each month to your retirement account. Since you were already used to living on your previous salary, allocating the extra income to savings should be easy.
Do your research before asking for a raise and present a solid argument about why you bring value to the company.
You could start a side hustle if you can’t increase your main job’s salary. The money you make would be extra, so you add it to your retirement account without changing your budget.
Ideas for a side hustle include driving for a ride-share, making and selling crafts, babysitting or pet sitting. If you have something that you already enjoy doing, it can make a side hustle not feel like work.
“It’s 2023, and the ‘gig economy’ isn’t just for the millennials,” said Brian Quigley, founder at Beacon Lending. “A side hustle isn’t about tiring yourself out but strategically aligning your skills with the market’s demands. For instance, if you’ve been in the corporate world for years, consider consulting or freelancing in your expertise. Not only does it offer an additional revenue stream, but you can also often set your rates, ensuring the extra effort is financially worthwhile. Every dollar earned here can be funneled directly to your retirement account, giving it the boost it needs.”
Sell Unneeded Items
If you have items you don’t need around your house, you could sell them for cash and deposit the proceeds into your retirement savings accounts.
Maybe there are kitchen items you don’t use anymore, furniture you could go without or jewelry you don’t wear. Although this isn’t a long-term solution, it could help boost your retirement accounts.
2. Reduce Spending
In addition to increasing your income, you can reduce your spending and use your savings for retirement. Start by eliminating how much you eat out or the amount you spend on entertainment each month. Also, look for things like unused subscriptions that you could cancel.
3. Take Advantage of Catch-Up Contributions
Catch-up contributions allow those ages 50 and older to save additional money for retirement on a tax-advantaged basis. The additional savings allow those who are behind on saving for their retirement to “catch up.” Catch-up contributions raise the ceiling of the IRS’ annual limitations for retirement contributions. You are eligible for catch-up contributions during the start of the calendar year when you turn 50, so you don’t have to wait until your birthday to take advantage.
“If you’re over 50, the IRS has your back,” Quigley said. “Recognizing that many nearing retirement age might be behind on their savings. This isn’t just about contributing more; it’s about leveraging the power of tax-advantaged growth and maximizing the yield of your contributions.”
The catch-up contribution limits vary based on the retirement account type. For 2023, the catch-up contribution amount was $7,500 for 401(k) accounts ($30,000 total), $1,000 for traditional IRA accounts ($7,500 total), $1,000 for Roth IRA accounts ($7,500 total), and $3,500 for SIMPLE IRA accounts ($19,000 total).
4. Change Your Risk Tolerance
You may want to adjust your retirement portfolio to limit risk if you are nearing retirement age. Your portfolio should reflect this limited risk tolerance since you have less time until you need the money.
5. Take Advantage of Your Employer’s Full 401(k) Match
A 401(k) is a retirement savings plan offered by your employer. A 401(k) allows you to contribute money pretax, which can save you significantly. If your employer offers a 401(k) match, you should take full advantage. Some employers match whatever the employee contributes to their 401(k) plan, often up to a certain amount or percentage of the employee’s salary. This is essentially free money offered by employers. If you aren’t sure if your company has a match, contact your employer’s HR department.
The Bottom Line
It is very important to save enough money for retirement. If you need to save more, you can try contributing more, reducing spending, taking advantage of catch-up contributions, changing your risk tolerance or taking advantage of your employer’s total 401(k) match.
