Three Ways To Kick Retirement Savings Into High Gear

You know you need to do it. You know it really matters. Yet retirement savings often falls to the bottom of the list in our bustling family and work lives.

It’s not enough to say “later” or “someday” when it comes to saving. It really has to be now, today, and it won’t be a painful process, once you get started. Here are three strategies for getting your retirement savings into high gear.

Strategy No. 1: Cut a hole in your budget

You can’t save money you don’t have. Unless you know a windfall is coming, like a quarterly bonus or a raise, the only way to get that money is to lower your spending. But how?

One really simple way is to cut spending brutally. Making a car payment? Sell the car and take the bus. Eating out every day? Stop that habit cold. If you look dispassionately at your actual budget, you will find a big-ticket item in there somewhere that equals 10% or more of your take-home pay.

Cancel cable, ditch the gym you don’t attend, forget that upcoming pleasure trip and save the money for retirement instead.

Strategy No. 2: Automate everything

This one is a bit easier. People tend not to save because they spend so easily. But you can’t spend money you don’t receive. Go to your human resources office at work and ask them about direct deposit, if you don’t already have that set up. Show up with two bank account numbers and make sure they are unlinked or, better yet, in different banks.

Ask HR to send you two checks, one to the spending account and a second one to permanent savings. Then completely forget about the savings account until you get a monthly statement.

Strategy No. 3: Take the free money!

Huge numbers of people qualify for a 401k plan, personal IRA or both and fail to open one. It’s a shame, since the easiest way to save is to take the free money being offered to you by these types of accounts.

Your 401k often will include a matching amount from your company, usually a percentage of whatever you save up to a limit. There are no strings attached, other than that you might have to work for a number of years at your employer to collect it all, usually less than five.

The bigger deal for taxpayers is the break offered by saving through these plans. Saving in these plans literally lowers your taxable income; your tax bill, state and federal, declines. The savings comes out of the highest brackets first, so it’s a real boost. Not saving enough in your 401k plan enough to get the employer match and the tax savings is criminal neglect of your own future.

I hope these three ideas make sense and give you reason to act. They are relatively easy to do and nearly anybody can take this advice to boost their own retirement savings overnight.