10 tips to help you boost your retirement savings — whatever your age

When planning for retirement, the truth is that the before you start saving, the better off you lot could exist, cheers to the ability of chemical compound interest. But even if you began saving late or have yet to begin, it's important to know that y'all're not alone, and there are steps you can take to increment your retirement savings. "It's never as well late to get started," says Debra Greenberg, director, Retirement and Personal Wealth Solutions, Bank of America.

Consider the post-obit tips, which tin can help you boost your savings — regardless of your current stage of life — and pursue the retirement you envision.

1. Focus on starting today

Peculiarly if you're merely beginning to put coin away for retirement, start saving as much equally you can now and let chemical compound interest — the power of your assets to generate earnings, which are reinvested to generate their own earnings — accept an opportunity to work in your favor. "The before you can get started, the ameliorate off you'll exist," Greenberg says.

Starting early may help results, even investing a small amount

By starting to put abroad money before, a 25-year-erstwhile investing $75 per calendar month accumulates more assets by age 65 than if he or she had started to invest $100 per calendar month at age 35 — despite investing less each period. Investing a smaller dollar amount over a long time horizon can accept a greater touch on on investment results than investing a larger dollar amount for a shorter catamenia of time.

Bar chart displaying examples of asset value that could be earned by a 25 year old giving $75 per month and a 35 year old giving $100 per month, by age 65. A 25 year old giving $75 per month may generate $88,943 at a 4% rate of return, $150,109 at a 6% rate of return, or $263,571 at an 8% rate of return by age 65. A 35 year old giving $100 per month may generate $69,636 at a 4% rate of return, $100,954 at a 6% rate of return, or $150,030 at an 8% rate of return by age 65.

Investing in securities involves risks, and there is e'er the potential of losing money when you invest in securities.

Source: ChartSource®, DST Systems, Inc. This example is hypothetical and does non represent the performance of a particular investment. Your results will vary. Actual investing includes fees and other expenses that may issue in lower returns than this hypothetical case. © 2022, DST Systems, Inc. All rights reserved. Not responsible for any errors or omissions.

2. Contribute to your 401(k) account

If your employer offers a traditional 401(k) plan and you're eligible, it may allow you to contribute pretax coin, which can potentially be a pregnant advantage. Say you're in the 12% tax subclass and program to contribute $100 per pay menstruum. Since that money comes out of your paycheck earlier federal income taxes are assessed, your accept-home pay volition drop by only $88 (plus the amount of applicable state and local income revenue enhancement and Social Security and Medicare revenue enhancement). That means you can invest more than of your income without feeling it every bit much in your monthly budget.Footnote 1 If your employer'due south 401(k) programme likewise offers a Roth 401(yard) feature, which uses income afterward taxes rather than pre-tax funds, y'all should consider what your income tax subclass will be in retirement to aid yous decide whether this is the right choice for you. Fifty-fifty if you leave that employer, you take choices on what to exercise with your 401(one thousand) account.

3. Meet your employer's friction match

"If your employer offers to lucifer your 401(k) plan contributions, brand sure you contribute at least plenty to take full advantage of the match," Greenberg says. For case, an employer may offer to match fifty% of employee contributions upwardly to 5% of your salary. That means if you earn $50,000 a year and contribute $2,500 to your retirement plan, your employer would kicking in some other $1,250. It's essentially free money. Don't leave it on the table.

4. Open an IRA

Consider establishing an individual retirement account (IRA) to help build your nest egg. Y'all take 2 options: a traditional IRA or a Roth IRA. A traditional IRA may be right for you depending on your income and whether y'all or your spouse are eligible to participate in a workplace retirement programme. Contributions to a traditional IRA may be tax-deductible and the potential investment earnings accept the opportunity to grow tax-deferred until you make withdrawals during retirement. If yous encounter the phased-out modified adapted gross income limits, which are based on your federal tax filing status, a Roth IRA may be a good pick for you.Footnote 2 A Roth IRA is funded with after-tax contributions, so once you have turned age 59½, qualified distributions, including any potential earnings, are federal income revenue enhancement-free (and may be state income tax-costless) if sure property period requirements are satisfied. To make up one's mind what type of IRA could work best for you, go to Discover out which IRA may exist correct for you and view the most current 401(k) and IRA contribution limits.

5. Take advantage of grab-up contributions if you're age l or older

One of the reasons it'due south of import to get-go saving early if y'all tin can is that yearly contributions to IRAs and 401(k) plans are express. The good news? As of the agenda year you reach age 50, you're eligible to go beyond the normal limits with grab-up contributions to IRAs and 401(k)south.Footnote iii So if over the years you haven't been able to salve as much as you would've liked, catch-up contributions tin can help boost your retirement savings.

6. Automate your savings

You've probably heard the phrase "pay yourself outset." Make your retirement contributions automatic each month and y'all'll take the opportunity to potentially grow your nest egg without having to think about information technology, Greenberg says. The Merrill Automated Funding Service (PDF) allows you to automate regular contributions to your Merrill IRA from another business relationship at Merrill, Bank of America or other fiscal institution. You lot likewise can automate your investment selection with the Merrill Automatic Investment Program, which invests avails automatically in specific funds.Footnote iv

seven. Rein in spending

Examine your budget. You might negotiate a lower charge per unit on your car insurance or save by bringing your lunch to piece of work instead of buying it. Merrill has a cash menses calculator that can help you decide where your coin is going — and find places to reduce spending so you have more to save or invest.

Your contribution charge per unit: A footling extra can assist make a large difference

How much y'all contribute to your retirement plan business relationship today tin make a large difference in how much y'all have when you're ready to retire. Just increasing your contribution charge per unit from 4% to 6% could add together more than than $101,000 to your nest egg over thirty years, bold a $50,000 salary.

Bar chart illustrating how much a 4%, 5% and 6% contribution of a $50,000 annual salary over 30 years could contribute to a retirement nest egg. 4% of a $50,000 annual salary could amount to $203,419 in 30 years. 5% of a $50,000 annual salary could amount to $254,265 in 30 years. 6% of a $50,000 annual salary could amount to $305,123 in 30 years.

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Source: Bankrate, 401k Retirement Computer. Example is based on a 7.two% rate of return. This instance is hypothetical and does not represent the performance of a particular investment. Your results will vary. Bodily investing includes fees and other expenses that may result in lower returns than this hypothetical example.

8. Set a goal

Knowing how much you may demand not only can assistance y'all better understand why you're saving, but also tin can brand it more rewarding. Set up benchmarks along the way and gain satisfaction as you pursue your retirement goal. Use the Personal Retirement Calculator to aid determine at what age you lot may exist able to retire and how much you may need to invest and salve to do so.

9. Stash extra funds

Extra money? Don't simply spend it. Every time you receive a enhance, increase your contribution percentage. Dedicate at least half of the new coin to your retirement plan account. And while it may be tempting to have that tax refund or bacon bonus and splurge on a new designer purse or a vacation, "don't treat those extra funds equally found coin," Greenberg says. She advises that you treat yourself to something small and use the rest to help make bigger leaps toward your retirement goal.

10. Consider delaying Social Security as you lot become closer to retirement

"This is a big one," Greenberg says. "For every twelvemonth yous can delay receiving a Social Security payment before you accomplish historic period 70, you can increment the corporeality you receive in the future." Age 62 is the earliest you tin brainstorm receiving reduced Social Security retirement benefits, simply for each year y'all wait (until age 70), your monthly benefit will increase, and the additional income adds up rapidly. Pushing your retirement back fifty-fifty 1 yr could make a pregnant difference.Footnote five It tin also increase potential future survivor benefits for your spouse.

"Recognizing the need to put money away for retirement is the first step," Greenberg says. Understand how much you lot desire to sock away for retirement and find creative ways to increase your contributions. Starting too late and saving besides fiddling is a common regret among retirees. Making the effort now can assistance you await forward to retirement.

Adjacent steps

  • Find out if yous're on rails for retirement by using our Personal Retirement Estimator to help determine at what age you may be able to retire and how much you may demand to invest and salve to do so
  • Determine where your money is going past using our cash flow calculator
  • Learn how the Merrill Retirement Evaluator can help you see where you lot stand up in your current retirement planning

Footnote 1 Income tax will exist due upon withdrawal and yous may be subject to a 10% additional federal tax for withdrawals prior to age 59½ unless an exception applies.

Footnote two Contributions to Roth IRAs begin to phase out at different modified adjusted gross income ranges for married taxpayers filing jointly, married taxpayers filing separately and singles or heads of households. Please encounter Roth IRA Contribution Limits for specific income amounts.

Footnote 3 http://www.irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions

Footnote 4 Delight keep in mind that an automatic investment plan does not ensure a profit or protect against loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating cost levels; investors should carefully consider their financial ability to continue their purchases through periods of fluctuating toll levels.

Footnote 5 http://world wide web.ssa.gov/retire2/delayret.html

Hypothetical performance results have certain inherent limitations. Hypothetical returns do not correspond bodily investments and are achieved through the retroactive awarding of investment returns with the do good of retrospect. No representation is made that a client will achieve results similar to those shown. No representation is fabricated that any business relationship will or is likely to achieve profits or losses similar to those shown. In fact, in that location are frequently abrupt differences between hypothetical performance results and the actual results later achieved. The hypothetical results and functioning streams used to compile the hypothetical performance may be materially different from the customer'south actual holdings.

Merrill, its affiliates, and financial advisors exercise not provide legal, tax, or accounting advice. You lot should consult your legal and/or tax advisors earlier making whatever fiscal decisions.

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