6 Ways to Enhance Your Retirement Savings

Saving for retirement is quite crucial. It gives you financial independence in your senior life. This eliminates the need to depend on government programs or family members whose support may not be enough to finance your lifestyle. During retirement, unexpected expenses, including home repairs, medical emergencies, and changes in economic conditions, can result in unanticipated financial burden.

However, retirement savings serve as a safety net, allowing you to deal with these emergencies without your financial stability getting compromised. Let’s explore six ways to amplify your retirement savings.

6 Ways to Enhance Your Retirement Savings

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Invest in self-directed brokerage accounts (SDBAs)

SDBAs are specialized investment accounts within a retirement plan that allow you to invest beyond the standard options available. Unlike ordinary retirement plans, which limit investors to pre-selected investment options, investing in SDBAs lets you pick from individual bonds, ETFs, mutual funds, stocks beyond the key plan offerings, and modern investments like REITs. Investing in a self-directed brokerage account comes with numerous benefits, including the following:

More investment options: SDBAs provide several investment options stretching past the traditional restrictions of employer-sponsored retirement plans
Improved diversification: SDBAs allow you to invest in various assets, which helps to minimize the effect of poor performance
More control and customization: In SDBA investment plans, you can actively manage your accounts and pick your investments accordingly. The capability to adjust your portfolio in reaction to changing personal financial goals or market conditions allows you more control over your investment outcomes

If you’re a participant in 401k, 401a, 403b, and 457 plans, pathfinder retirement solutions and other trusted platforms allow you to access various accounts via your self-directed brokerage account.

Start saving early

People are now living longer, which means they’ll spend more years in retirement. Funding these years will need a lot of money. Depending on Social Security alone won’t be enough because it only covers a portion of the income you earned before retiring.

Starting your retirement savings early allows you to accumulate enough money to live comfortably during retirement. When you start early and invest consistently, you can amass more assets. In addition, investing with an extended time horizon lets you resist volatile markets and remain invested, allowing you to reap the rewards of compound interest

Automate your savings

Although saving can be challenging, it pays off eventually. Saving works well when you have a plan to save money consistently and grow it over time. Automating your savings is one of the best ways to achieve this.

Automated savings prevent the need for manual transfers, which makes it easier to contribute to your retirement objectives consistently. Automating your savings facilitates the potential for growth via compound interest, significantly growing your savings. However, this approach requires the right bank account, including a high-yield savings account, and time.

Maximize your employer’s match

Taking advantage of the employer match in your 401k is one of the best ways to maximize your retirement savings. To make the most of this approach, consider:

Understanding your employer’s matching plan: Your employer may offer a partial match up to a particular portion of your salary or a dollar-for-dollar match
Contributing enough to get the complete employer match: If your employer gives you a match up to 6% of your earnings, you should contribute at least a similar amount to your 401k for maximum benefits
Raising contributions slowly: This is an effective tactic for growing your retirement savings without a significant effect on the pay you take home

Open an IRA (Individual Retirement Account)

IRAs are tax-advantaged retirement savings accounts that provide tax benefits, such as tax-deferred or tax-free growth, helping grow your retirement savings quicker than in a conventional investment or savings account. You can invest in one or more of the following IRAs:

Traditional IRA: This account allows you to defer your income taxes today and pay them when you withdraw during retirement, possibly at a reduced rate
Rollover IRA: This account is funded using funds rolled over from employer-sponsored 403 b, 401k, pension plan, or 457 plans
Roth IRA: Contributing to a Roth IRA allows you to pay income tax on your contributions today, letting them grow without getting taxed. Also, your withdrawals may be income tax-free during retirement if some conditions are met

Avoid early withdrawals

Withdrawing money from tax-advantaged accounts comes with high tax implications that can exhaust your financial resources. Taking out cash before the right time can incur a penalty and can lead to a loss of compound interest. Avoiding early withdrawals can help boost your retirement savings.

Endnote

Saving for retirement gives you financial freedom during your old age while allowing you to maintain your lifestyle. Familiarize yourself with the ways to enhance your retirement savings, including investing in SDBAs, starting saving early, automating your savings, maximizing your employer’s match, and more.