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4 Quick Tips for Maximizing Your Retirement Savings

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You’ve been doing exactly what you needed to do in order to save for your golden years — setting money aside in a retirement account (whether it be a 401(k), 403(b), or IRA).

Or so you thought. One look at your balance, and you realize that the lump sum isn’t nearly large enough. So how can you maximize it? Read on for four quick tips for maximizing your retirement savings:

1. Earn your employer’s match

Many businesses offer their employees the perk of contributing to their retirement accounts. The way it typically works is that the worker must set aside part of their paycheck for retirement and the employer will match those funds. For example, say your employer does a 50 percent match, up to 10 percent. That means, if you take advantage of the full match, 15 percent of your annual salary will go in your retirement savings: You contributed 10 percent and 5 percent comes from your employer. Obviously, a 100 percent match is the best, but aim to take full advantage of any match, regardless of the amount — otherwise, you’re walking away from free money.

2. Adjust your allocations

While it’s great to put something on autopilot and not think about it, unfortunately, you can’t do that with your investments. On occasion, you need to rebalance your portfolio. Otherwise, own too many stocks as you near retirement and you could expose yourself to too much risk — jeopardizing your nest egg.  Conversely, own too few stocks at a young age and you miss out on potential earnings.

3. Make catch-up contributions

If your workplace departure is just a few years away, then you’re eligible to contribute even more to your tax-advantage retirement savings accounts. Once you’re age 50 or older, the IRS allows you to set aside an additional $5,500 in your 401(k), 403(b), or SIMPLE IRA on top of the $17,500 that you’re legally allowed to put in annually. And if you have a Traditional or Roth IRA, you can stash an additional $6,500 in 2014.

4. Minimize account fees

You may not realize it, but you’re paying fees on your retirement account — whether you have a 401(k) or an IRA. (You don’t receive a bill in the mail for these charges; rather, they’re automatically deducted from your account. And unless you do a bit of digging, you’re unlikely to even see the withdrawal.) It’s quite common for financial advisors to base their fee on a percentage of your assets. Let’s say that you’re charged 1 percent on your total retirement portfolio. Sounds cheap, right? Well, if you have $100,000 saved, it’s costing you $1,000 to invest your money! And if that’s not bad news enough, remember that these fees are levied annually — meaning you’ll be paying a heck of a lot more than that over your lifetime. And the higher the fees, the lower your overall nest egg is.

 

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