Simple Tips on Saving for Retirement

How to Boost Your Retirement Savings

     Whether you're a new employee or nearing retirement, you still have the potential to build up some money in your savings account.

When planning for retirement, the earlier you begin saving, the better, thanks to the power of compound interest.

But if you're running late saving money, or haven't started yet, it's important to know that you're not alone.

There are several ways and strategies you can do to increase your retirement savings. It's never too late to start.

Consider these simple tips, which can help you increase your retirement savings — and achieve the retirement you dream of.

Savings Mindset

Saving for years just so you can make 70 to 90% of your old salary annually when you retire sounds like a disconcerting idea.

How can you save that much while you are still living your life before retirement? Luckily, there's compound interest -- a small amount of money contributed to a retirement savings account like a 401(k) or Roth IRA, which can grow rapidly over decades.

You have to plant a seed to grow a tree, and when it comes to saving for retirement, it can be difficult to be disciplined about paying now, so as to benefit later. This is where the saving mindset is formed.

Look at the budget you set up as part of your plan. Does a large portion of your monthly income go to credit card companies? Then you have to be determined to pay off your credit card debt aggressively. One of the great ironies of saving well is that it can often involve some serious spending, at least in the beginning.

You should set a certain amount of your pretax earnings to contribute to your retirement savings on a monthly, or biweekly, basis and take it out of your paycheck, just like your taxes.

401(k) Accounts

If your employer offers a traditional 401(k) plan and you qualify, you can contribute pretax money, which is potentially a significant advantage.

For example, let's say you're in the 12% tax bracket and plan to contribute $80 per pay period. Because that money comes out of your paycheck before federal income taxes are assessed, your take-home paycheck will drop by just $68 (plus the amount of applicable state and social security, local income taxes, and medicare taxes). That means that you can invest more of your income without feeling it as big as your monthly budget.

If your employer's 401(k) plan also offers a Roth 401(k) feature, which uses after-tax earnings rather than pre-tax funds, you should consider what your income tax bracket will be in retirement, to help you decide if this is the right choice for you. Even if you do leave the company, you have a choice about what to do with your 401(k) account.

Set up Automatic Withholding

The main plus of a 401(k) account is that the money is deducted from your paycheck, and you never get a chance to spend it. If you don't have access to a 401(k) at work, consider setting up a direct deposit into an individual retirement account or a taxable account to easily save retirement money.

Open IRAs

Consider establishing an individual retirement account (IRA) to help prepare for your retirement.

You have 2 choice: roth IRA and traditional IRA. (investopedia.com)

A traditional IRA may be proper for you, it depend on your income, and whether you or your partner are eligible to participate in a workplace retirement plan.

Contributions to a traditional IRA are tax-deductible, and the potential investment income has the opportunity to grow tax-deferred, until you make withdrawals during retirement.

If you meet the gradually modified adjusted gross income limit, which is based on your federal tax filing status, a Roth IRA might be a good choice for you.

Claim Credit Savers

Retirement savers whose adjusted gross income was less than $30,000 in 2014 are entitled to a tax credit of 50, 20, or 10% of the amount contributed to a 401(k) or IRA up to $2,000. Investors with the lowest incomes deserve the largest tax credits for their retirement savings.

Manage Your Mortgage

If you own a home, you have huge debts and a very valuable asset. You can use the house to your advantage as either.

If you're a young saver and own a home, keep an eye on interest rates. If they do start to fall, consider refinancing your mortgage to a lower rate.

Using the additional money that was previously used for recurring monthly fees from your higher mortgage payments, it can then be used for your retirement savings contributions.

Do the math first. Paying off accumulated credit card debt will likely prove a better use for extra income, since credit cards almost always have higher rates than home mortgages. If the opposite applies to you, refinancing your mortgage is a good idea.

Avoid the temptation to take out a second mortgage to consolidate your debt unless you believe your spending habits have been curtailed to suit a savings mentality and the cost of paying off credit card and other debt is more expensive than paying the extra mortgage every month.

In the end, the best thing you can do with your mortgage is pay it off by the time you retire. The loss of hundreds or thousands of dollars of recurring monthly expenses such as mortgage payments is an instant, substantial increase in income.