Investing for retirement is crucial for your future financial security since Social Security likely can’t fully cover your costs after you stop getting paychecks. Unfortunately, many Americans are behind on funding their nest egg and with good reason — putting aside money for the distant future can be difficult when you have today’s expenses to think about.
The good news is, there are a few surefire ways to increase the amount you’re saving for retirement. Here are three of them.
1. Automate your investments
Making your retirement investments automatic is one of the easiest and most effective ways to increase the amount you’re saving. That’s because once you set up an automatic contribution to your retirement plan, chances are good you aren’t going to go through the trouble to change it. This status-quo bias can make retirement savings effortless.
Setting up automatic investments is really easy with a 401(k) as you just talk to the plan administrator at work and sign up to have contributions taken from your paycheck. Most brokerage firms and banks also facilitate this option too, so you can sign up for this even if you don’t have a workplace plan. Just arrange for the money to come directly out of your checking account on payday before you have a chance to spend it on anything else.
2. Prioritize retirement savings in your budget
Living on a budget can help you ensure you’re saving enough for retirement — especially if you treat investing for the future as a must-pay bill.
Instead of making retirement savings something you do with money that’s left over, commit to saving a certain amount each month and budget for that along with your mortgage or rent, debt payments, and other essential expenditures.
Anything left over after you’ve budgeted for retirement savings and necessities can go toward discretionary costs.
3. Invest your windfalls
Finally, many people come into some unexpected money outside of their regular paychecks at some point over the course of the year.
This might come from a tax return, a bonus at work, a cash gift for a birthday or holiday, or from a host of other sources. Whenever you get cash you haven’t already allocated to a specific need, commit to putting it into your retirement accounts so it can work for you over time.
It’s difficult to do this with a 401(k) because you have to set up contributions with your employer. But you can easily move money over into a Roth or IRA at a brokerage firm whenever you want to. This is one of many good reasons why you may want to use one of these accounts for retirement savings in addition to a 401(k), if you have one. IRAs also provide more investment options than most 401(k)s do and may have lower fees.
If you budget for a set amount to save; sign up for automatic contributions and move that amount into your retirement savings on payday; and invest unexpected cash that comes your way, you should be well on your way to building the secure future that you deserve.
Original source: The Motley Fool