More than 16% of large organizations have suspended 401 (k) correspondence, at least temporarily, due to the COVID-19 pandemic, according to the Plan Sponsor Council of America. Whether you’ve lost or never had one, the burden of retirement savings falls entirely on your shoulders. It’s a difficult position to be in, but with the right strategies, you can make up for the lack of a 401 (k) match and stay on track for the retirement you want. Try one or more of the tips below.
1. Reduce your expenses
Often, the simplest way to increase your savings for retirement is to change the way you are allocating your funds. Review your budget and look for areas of overspending, such as paying for unused subscriptions or buying takeaway food several nights a week, when cooking at home would be more affordable. Reduce or eliminate these costs and put the surplus money into your retirement savings.
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Of course, the simplest method is not always the easiest, especially with so many people still struggling financially due to the pandemic. If your budget is already kept to a minimum, try one of the other suggestions below.
2. Start a side run
Collateral moves give you the opportunity to earn some extra cash on your own terms and can sometimes turn into full-time jobs, if you want. While most of us may find the prospect of additional work exhausting, side runs need not be boring. You can choose something that matches your interests, such as creating and selling art, helping others create websites for your business, or even walking dogs.
Use your earnings to increase your savings for retirement. Part of your accumulated income technically belongs to the government in the form of taxes, but if you use the right retirement account (more on that below), you can reserve more money for retirement without affecting your tax account.
When considering a sideways move, remember to weigh all the costs associated with it to decide if it’s really worth it. For example, drivers of shared travel spend more on gasoline, wear out their vehicles more and may need special insurance coverage. This can offset some of your profits, so you should keep this in mind when evaluating how much money your ally will give you for retirement.
3. Keep your money in accounts with tax advantages
You can technically keep your retirement savings anywhere – even in a savings account or taxable brokerage account. But if you want to retain as much money as possible, you should keep it in a retirement account with tax benefits. A 401 (k) retirement plan or other professional retirement plan is still a good option, even if your plan does not have a match. You can automatically transfer a certain dollar amount or percentage of your income from each paycheck to 401 (k) and contribute up to $ 19,500 in 2021 or $ 26,000 if you are 50 or older.
An IRA is another option if you don’t have access to a retirement plan in the workplace, or just want a little more control over what you can invest. Anyone can open one of these and you can add money whenever you want, but you can only contribute up to $ 6,000 in 2021 or $ 7,000 if you are 50 or older.
You should also decide whether tax or Roth deferred accounts make the most sense for you. Deferred tax contributions provide a tax reduction today, but you owe income tax on withdrawals. The government taxes Roth’s contributions in the year you make them, but your withdrawals are tax-free.
Deferred tax accounts are generally more appropriate if you think you are earning more now than you will spend annually on retirement. You can also consider one of these if you are saving additional income for retirement and don’t want to worry about increasing your income tax account this year. Roth accounts can be the wisest choice if you believe you are earning almost the same or less than you would spend on retirement.
This is not an exhaustive list of how you can find more money to save for retirement. The tips above are good starting points, but go beyond them and think of other ways to increase your savings. See if there are other companies hiring in your industry that pay more or look for promotional opportunities within your existing company. Whenever you receive a raise, first increase your savings for retirement. And if your company starts offering a 401 (k) match, be sure to take advantage of it every year when it is available.