Boost Your Retirement Savings with a Simple Strategy
When it comes to retirement savings, many of us focus on a specific target amount. However, experts suggest that it’s more important to focus on your personal savings rate to ensure you reach your goals.
Take Advantage of Employer Matches
The start of the year is an ideal time to reassess your retirement contributions and overall savings strategy. By doing so, you can take advantage of employer matches, adjust your monthly budget, and stay ahead of potential market shifts. According to Douglas Boneparth, a certified financial planner, increasing your retirement savings now gives your money more time to compound, earning interest on both your contributions and previously earned interest.
Maximize Your 401(k) Contributions
If you have a 401(k) plan through your employer, now is a great time to review your contribution rate. Mike Shamrell, vice president of thought leadership at Fidelity, recommends checking how your savings rate corresponds to your employer’s company match. This “free money” can significantly impact your nest egg over the long term.
Aim for 15% Savings Rate
Fidelity recommends saving at least 15% of your pre-tax income annually, including your contributions and employer matches. Even a 1% increase in your deferral rate can make a big difference to your retirement savings over time.
Fund Individual Retirement Accounts
Retirement savers have a window of opportunity to fund individual retirement accounts for both this year and last year. Contributions can be made up to April 15, and individuals can contribute $7,000, or $8,000 if they are age 50 and over.
Revisit Your Asset Allocations
Heading into the rest of the year, now is a great time to revisit your personal asset allocations. Make sure your allocation didn’t drift too far into equities and that you don’t have more exposure to equities than you might realize. Consider target date, asset allocation, or balanced funds, which can help decide how your funds are allotted for you.
Consider Your Risk Capacity and Tolerance
Identifying your personal risk capacity and tolerance ahead of time can help you stay the course during market turbulence. Investors who bail during the market’s worst days may miss the best days, which often closely follow.
Review Your Allocations After Life Events
If you’ve had any major recent life events, such as getting married, buying a house, or having a baby, you may want to check that your allocations still correspond to your long-term plans. By taking these simple steps, you can boost your retirement savings and stay on track to achieve your goals.
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