Posted on Jun 21, 2023
Many people worry whether they will have enough in their retirement savings to live comfortably once they leave the workforce. Indeed, retirement savings play a vital role in securing a stress-free financial future. While many employees may feel overwhelmed by the prospect of saving for retirement, especially during this period of high inflation, even small changes can have a significant impact over time.
In “The Compound Effect,” author Darren Hardy explains how little, everyday decisions shape our lives and either steer us toward achieving our goals or losing momentum. This is especially true regarding budgeting and expense management. One of the most effective ways for employees to increase their retirement savings is to create a realistic budget, track spending, and redirect some discretionary funds, such as dining out and entertainment, to their 401(k)s. Small sacrifices made in the present add up. Automating consistent, additional contributions directly from one’s paycheck to one’s retirement account boosts savings effortlessly. At the same time, these contributions can decrease taxable income.
In addition, using discount coupons when shopping, comparing car and home insurance rates on a yearly basis, canceling subscription services that are unused, comparing banking rates, and paying off high-interest debt can free up funds that can be invested for retirement.
Employees should also take full advantage of any retirement benefits or matching contributions offered by employers. Employees can effectively double their savings – with no effort - by contributing the minimum required to receive their company’s maximum matching contribution. Another way to make retirement savings as painless as possible is to increase automatic contributions after getting a raise and/or a bonus or a tax refund, thereby removing the temptation to spend the money elsewhere. Incrementally boosting contributions ensures that retirement savings grow in line with increasing income. The power of compounding accelerates the accumulation of funds year by year, resulting in big gains over time.
This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.Back to Blogs Helpful Resource Links