3 Essential Tips for Starting your Retirement Savings Now

3 Essential Tips for Starting your Retirement Savings Now

Americans have ended the year feeling quite cheerless regarding their retirement savings. Less than a third of Americans claim they feel great regarding how much they put away during the current year.

The year-end survey, that was carried out online by Harris Poll discovered that while 70% of Americans are saving for retirement, only 21% intend to max out an individual retirement account like a traditional or Roth IRA in 2016.

The possible greater problem, however, is the fact that a lot of people are not likely to do better in the coming year, with only 32% of those who have a workplace retirement account reporting plans to step up contributions in 2017. That’s in spite of potential 3% pay raises — the anticipated average, as outlined by a survey of U.S. companies — and a median income that was up a year ago for the very first time since 2007.

Here are three ways to make 2017 the year of the retirement savings.

1. Calculate retirement savings needs

You can’t save money for retirement if you don’t have an idea on the amount of money you need for retirement; without running the numbers, you’re most likely to save not enough or too much. Fortunately, this isn’t an exercise that will require math, or even pencil and paper. A web-based retirement calculator can quickly show you the amount of money you should save on a monthly basis based upon factors you put in: your income, age, estimated spending needs and investment return.

2. Make small increases part of your yearly routine

The most convenient way to save more is just one step at a time; picture this as a whole new ritual: Take just a few minutes on Jan. 1 to increase your retirement contribution by 1%.

Think about this: Nerd Wallet’s math discovered that if a person earning $40,000 and presently saving 5% raises his savings rate 1% annually until he’s saving 15% of income — the normal retirement savings goal — he’ll get $1,053,455 after 40 years.

A number of employers do this for you by rapidly increasing your contribution to a 401(k) plan annually.

3. Make use of the right retirement accounts

As outlined by the Nerd Wallet’s survey, 55% of Americans that are saving for retirement — and 63% of those ages 18 to 34 — report doing this at least to some extent within a bank savings account.

Those consumers could very well be missing out on the big tax savings of tax-advantaged retirement accounts, including employer matching dollars in workplace plans as well as the chance to invest their money for a greater return and not settle for a bank interest rate of 1% or less.

Retirement savings dollars need to always go into a workplace plan with matching dollars first. As soon as that match is fully captured, investors can look at a Roth or traditional IRA. The difference there depends on taxes. The money in a Roth may well be more valuable. If all retirement account options are maxed out for the year, the final stop for extra dollars is a taxable brokerage account.