Saving for retirement is difficult, and if you’re falling behind, you’re not alone. The average retirement account balance is about $113,000 in 2022, according to Vanguard’s latest “How America Saves” report, and the median balance is only about $27,000.
However, as retirement costs continue to rise and Social Security faces continued financial challenges, workers may need to save more than ever to retire comfortably.
Fortunately, many workers have access to a special retirement savings benefit that could save them hundreds of thousands of dollars more without even lifting a finger. Here’s everything you need to know.
Instantly double your retirement savings
If you have access to a 401(k) through your employer, you may be eligible for employer matching contributions. With this benefit, your employer will match your 401(k) contributions, usually up to a certain percentage of your salary.
Although employer-to-employer correspondence may seem small at first glance, it can add up significantly over time. It is therefore wise to take full advantage of it.
The median income for U.S. workers in 2022 is $55,068 per year, according to the Bureau of Labor Statistics, and the average company match is 3.5% of a worker’s salary. That’s about $1,927 per year in this case.
If we assume you earn a modest average annual return of 8% on your investments, here’s roughly how much that $1,927 per year (or about $161 per month) could add up over time:
|Number of years||Total portfolio value|
To accumulate about $219,000 in savings, you’ll need to invest consistently for about 30 years. Keep in mind that these numbers only take into account the employer match. Once you factor in your own contributions, you’ll get at least double those numbers.
Additionally, most people will receive salary increases throughout their career. Since the company match is often a percentage of your salary, you could earn more over time from your employer as your income increases.
Increase your savings
It’s wise to make sure you’re investing at least enough to get the full match from the employer. But sometimes that means saving hundreds of dollars a month, which isn’t easy for many people.
If you’re struggling to save, sometimes it can be helpful to set up automatic contributions to your retirement account. With a 401(k), you can often transfer a set amount directly from your paycheck to your retirement fund, which can make it easier to save that money before you have a chance to spend it.
Also keep in mind that saving even a little is better than nothing at all, especially if your company offers matching contributions. Even if you can only afford to save a few dollars a week, starting now, while time is on your side, can still help you accumulate more than if you had to invest more each month later.
Not all 401(k) plans offer matching contributions, but if yours does, it’s wise to do your best to maximize your contribution. While it may not seem like much right now, it could easily add up to hundreds of thousands of dollars over time without any effort on your part.
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