Do you fear you're not saving enough for retirement? Don't beat yourself up. Most people would be willing to do whatever it takes to fully fund the retirement they dream of. It's just a lack of time, tools, and sometimes money standing in the way.
With that as the backdrop, here's a look at four things anyone can start doing today to make a big difference in how well your eventual retirement is funded.
1. Automate your savings
Socking some money away from each and every paycheck into a retirement fund should be the first thing any of us think about when we get paid. However, most of us tend to think about paying bills first. We typically plan on using any leftover time or money to add to our retirement savings. Problem? All too often, there's just not any time or money left at the end of the month.
The solution is simple enough. If it's too difficult or time-consuming to deposit and then invest new monthly contributions to a retirement fund, instruct your broker or fund company to take the money out of your bank account as soon as it's earned — before you even get a chance to do something else with it. Some employers can do this for you as well. Most brokerages and mutual funds can also automate the monthly placement of this money into a growth investment as well, taking one more task off of your plate.
Some investors fear this approach may leave them short on money before the next paycheck shows up. In most instances, though, you'll adapt as necessary and end up never missing cash that was ultimately redirected toward your retirement savings.
2. Claim your free money
If you work for an employer that offers a 401(k) plan or similar retirement savings plans, you may be eligible for outright free cash contributions into such an account.
OK, there's a bit of a catch. Most of these plans will only match a certain amount of your own contributions to the same account. These employer contributions tend to be capped in the ballpark of 3% to 6% of your total salary, even if you're contributing more.
Nevertheless, in these instances, the immediate return on at least a small portion of your retirement savings is 100%. Even if your employer is only contributing $1,000 of its own money per year to your retirement account on your behalf, that's $25,000 over the course of 25 years' worth of work. Never even mind the earnings you'll achieve on those matching contributions during that time.
3. Track what you're spending (and review it regularly)
If you ever want to make yourself more than a little uncomfortable, break down how you spend every penny you spend in a given month. You'll be shocked at how dramatically the nickels and dimes add up to quarters and dollars. Data from the Bureau of Labor Statistics indicates the average U.S. household spends around $3,000 per year on entertainment, $2,000 on gasoline, and more than $8,000 on food. Apparel spending is approaching $2,000 per year. We're also spending nearly $5,000 per year on car payments, bringing our typical annual transportation costs up to a total of around $10,000. House payments are costing us in the ballpark of $7,000 annually.
Many of these costs are unavoidable. When put in this full-year light, however, each category's collective price tag can be daunting. Just crunching these numbers will motivate you to shave costs when and where you can, freeing up more funds to save for retirement.
Almost needless to say, the retirement savings hack — automating your savings — and closely tracking your spending go hand-in-hand with one another.
4. Decide now not to blow “found money” later
Finally, if you want to make the nicest retirement possible, commit to not blowing windfall cash like a bonus or an unexpected inheritance on something frivolous. Instead, decide now to tuck at least part of it away for the future.
There's a reason this obvious plan has to be spelled out before it even matters. That is, the sheer excitement of receiving money above and beyond your normal income can prompt ill-advised decisions. That's because the dopamine surge linked to a windfall (no matter how modest it is) will drive us to seek out pleasurable experiences like shopping or taking a vacation in order to maintain the euphoric high.
Of course, that purchased pleasure is still always short-term.
The trick to sidestepping the mistake, therefore, is understating and anticipating the temptation before it takes hold. As tough as it may be to not spend it when you get it, remind yourself the real, long-lived pleasure worth seeking out is being able to do everything you want to do how you want to do it in retirement.
The $21,756 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $21,756 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.