The IRS recently announced an increase in the annual contribution limit for 401(k), 403(b), most 457, and Thift Savings plans. Previously, you could only set aside $17,500 in your retirement account, but starting in 2015, that amount jumps to $18,000.
If you can’t put that much in savings, don’t beat yourself up. You can still work on maximizing your savings contributions with what you do have. And considering that one of the biggest financial fears is not having enough money to retire, finding a way to boost your nest egg can help alleviate some of the worry behind the fear. So try one, or several, of these simple strategies for building your retirement savings.
Save a little more each year.
Many finance companies make it easy for you to save more for retirement. All you need to do is enroll in their annual increase program, which bumps the pre-tax amount deducted from your paycheck by one percent each year. Say you’re putting six percent of your salary in your 401(k). Enroll in one of these programs and come January 2015, seven percent of your pay will be directed into your savings. The following year? Eight percent. Forbes reports that the number of savers currently using this tool is low, but that it’s responsible for a substantial number of account increases.
Get money from your employer.
Hands down, signing up for your employer match is the easiest way to sock more money away for retirement. Doing so rewards you with free money simply for the act of saving yourself. For example, an employee making $50,000 annually that puts five percent in her 401(k) and participates in a dollar-for-dollar matching program will receive an additional $2,500 each year. Employer matches do not go towards annual contribution limits, so if you’re able to put away the full $18,000, participating in one of these programs could net you some serious cash.
Don’t throw away your savings.
A 2014 paper written by Ian Ayers, a Yale University law professor, and Quinn Curtis, a law professor at the University of Virginia, found that many savers are paying large amounts in account fees. Examine your retirement plan’s offerings and make sure you’re investing in the low-cost options like index or target-date funds, as opposed to actively managed funds.
Find other sources of cash.
Borrowing money from your 401(k) or 403(b) might sound like a good idea since you’ll be, in essence, paying yourself back — complete with interest (that’s usually lower than what banks charge). In reality, however, this is a loan that you should never take out. That’s because when you borrow from your retirement account, you miss out on the potential growth your money would have if it were invested in the stock market. Plus, if you’re not able to pay it back, not only are you out your retirement savings, but you’ll also have to pay income tax and a penalty if you’re under 59 ½ years of age, too — depleting your savings instead of boosting it.