Planning and saving for retirement is a marathon, not a sprint. But just as you might have a weak mile or two in the course of running a long race, so too might you get thrown off course at some point during your career and start falling behind on retirement plan contributions.
In fact, a lot of people had no choice but to pause IRA or 401(k) plan contributions last year when the pandemic struck. But even without a pandemic, it's more than possible to hit a similar snag when personal circumstances get in the way, whether health issues or job loss.
If you need to get back on track for retirement, here are three tips to help you overcome the setbacks you might have faced recently.
1. Bank your tax refund
Most people who file a tax return wind up with a refund. If you recently received a chunk of cash from the IRS after filing your 2020 return, or expect to get one shortly, then that's money that can go directly into your retirement plan.
Now, you might think that a one-time contribution to your savings won't make a big difference, but imagine you're getting a $2,000 refund and aren't retiring for 30 years. If you put that money into your IRA or 401(k), leave it alone, and watch it grow at an average annual return of 8% (which is doable with a stock-focused investing strategy), then you'll end up growing that single contribution into over $20,000.
2. Get on a tighter budget
Now that things have improved with regard to the coronavirus outbreak and the world seems to be opening back up, a lot of people are eager to get out and do more. But you'll need to spend carefully in the coming months, especially if you've fallen a bit behind on retirement savings.
A good way to ramp up your contributions and avoid overspending is to set up a new household budget — one that reflects your current bills and accounts for the way inflation is making many common purchases, like groceries and gasoline, cost more. In fact, you may need to cut back in certain spending categories to ensure that you're not only able to enjoy going out and being social, but also generously fund your IRA or 401(k).
3. Consider a side job
Last year, a lot of jobs were shed when the pandemic first broke out. Nowadays, there are labor shortages in a number of key industries, like restaurants and retail, so if you're willing to pick up some evening or weekend shifts on top of your main job, you could earn a nice pile of cash and use it to boost your savings.
Of course, you may not be able to commit to an extra job's pre-set schedule if your primary job keeps you very busy. If that's the case, find a second job you can do at your convenience, like driving for a rideshare company or designing websites from home.
You'll need a healthy amount of savings during retirement to supplement your Social Security income. If you've fallen behind, don't sweat it. Instead, regroup and use these tips to give your savings the boost they need.
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