While most of us dream of a comfortable retirement, very few invest enough make those dreams a reality – or don’t invest anything at all – due to a lack of money available to do so. There are ways that you can fast-forward your retirement savings, either to make your portfolio larger than it is now, or to even get one started.
One of the best ways to find extra money for retirement savings is by investing windfalls of cash. Nearly everyone gets some sort of a windfall at least occasionally during a given year. It could be in the form of an income tax refund, a work bonus, a large commission check, or even the sale of personal items.
By putting the windfall into your retirement plan, instead of using it for other purposes, you can often add thousand dollars to your portfolio in a single event. If you do this with one windfall each year, your retirement portfolio will grow much faster and you’ll be well on your way to becoming rich.
This will require discipline to avoid spending the windfall on some other area of life. Part of the problem here is that when you know that a windfall is coming, you might start planning on where to spend it before you even get it. Instead of spending it, try investing it in your retirement portfolio instead.
If you really need to get your retirement savings into high gear you may have to be more purposeful in making it happen. That may require creating additional income streams. You can do this with a part-time job, contract work or even an ongoing side business. Any of these can generate income over and above your regular paycheck, that will produce the money you need to fund your retirement savings on an ongoing basis.
An important element should you go this route, will be to make sure that the extra income does in fact make it to your retirement savings. This may be easy to do with a part-time job where you can use direct deposit. But if the money is from contract work or a side business, you’ll have to get into the habit of putting any extra money into your retirement savings.
The last thing you want to do with this option is to get in the habit of simply adding the extra income to your regular budget. If you do, the extra income will simply disappear and you’ll have nothing to show for it later on.
This is an option that few people think about, but it’s a perfect way to save money for retirement. If you have a loan you’ve recently paid off, your budget is already prepared for the monthly deduction. The trick is to be sure that the money you USED to pay on the loan instead makes its way into your retirement account each and every month.
For example, let’s say you recently paid off a car loan on which you were paying $300 per month. The loan is now paid, so instead of making a monthly payment to a car lender, you instead “make the payment” to your retirement plan. If you have a 401(k), 403(b) or 457 then you can simply increase your payroll contributions by $300 per month. If you don’t have an employer plan then have the money directed to a Roth IRA!
The more automatic you can make the payment process, the easier it will be to go from paying the loan to funding your retirement account.
Another option is to carve out more room in your budget to find more money for retirement. If you can cut your monthly expenses by just 5%, you can redirect money into your retirement on a consistent basis.
If your budget is $4,000 per month, and you decide to cut it by 5%, that will leave you an extra $200 to put into your retirement account each month. That will mean that an extra $2,400 is going into your retirement account each year.
This is probably the most pain-free way of increasing your retirement portfolio. You simply take any raise from your boss or other pay increase you receive, and instead of adding the extra to your budget, you direct it into your retirement account.
Let’s say that you get a 3% pay increase. If you earn $5,000 per month prior to the raise, that will give you an extra $150 per month – or $1,800 per year – to put into your retirement savings.
This method is even better by the fact that a) contribution increases will be even more significant if they are done in multiple years, and b) since the contributions are tax-deferred, you’ll be able to invest the entire increase without tax consequences.
Statistics clearly show that most people are well beyond when it comes to saving for retirement. However, with a little discipline and creativity, you can boost your retirement savings in a matter of a few easy steps!
Can you think of other ways that you can increase your retirement contributions?
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