These simple strategies will add up when things wind down.
Your senior years may be just a faint glimmer on the horizon, but the moves you make today — and keep on making — will greatly impact your retirement when that time comes. Just make a few easy tweaks to your savings and investing strategy now and watch your nest egg grow.
Here are three no-brainer retirement hacks that require minimal effort now and offer major payoffs down the road. Referring to strategies, tips, advice, and those sorts of things as “hacks” is a new thing, but these tried-and-true tactics for growing savings are not. Try them yourself, stick to them, and your future self will look back kindly at your current you.
1. Pay yourself first by setting it and forgetting it
You won’t miss the cash you don’t have, right? That’s the “set it and forget it” idea behind automatic payroll deductions for a 401(k) or contributions to an IRA. Or if you have the option, you can do both. The long-term results of that systematic approach can be significant, especially if you use auto-increase features that kick up that contribution a bit each year until you reach the IRS maximums.
Many employers’ savings plans do that for you. For instance, Vanguard says 70% of its plan participants were auto-enrolled by their employer and two-thirds of them have automatic deferral rate increases. Simple, right?
This approach is particularly effective for three big reasons:
- It requires less discipline than tucking some savings away yourself each time you get paid.
- You can dollar-cost average your investments, which mitigates the risk of buying stocks and bonds at market-high points.
- You’ll reap the benefits of compounding interest and growth.
2. Leverage the growing limits and catch-up contributions
The IRS regularly raises the contribution limit for 401(k), 403(b), and most 457 plans. This year, they’re all $22,500. The IRA limit for Roth and traditional IRAs is $6,500. If you’re 50 or older, you can add $7,500 to the 401(k) limit and $1,000 to the IRA limit.
This additional influx of savings can provide a valuable boost. Make sure to take full advantage of catch-up contributions if you can.
3. Be aggressive early on and then more conservative
The more years your investments have to compound, the larger your retirement savings will grow. When you’re younger, you can be more aggressive with those investments, but as your time for recovering from market dips shrinks, you can get more conservative to protect your assets.
You can make those decisions yourself, work with a trusted advisor to help you decide, or leave it up to your retirement plan. So-called life-cycle and target-date plans are widely popular. Vanguard, for instance, says that 56% of its participants were invested in a single target-date fund.
Automate today for a more secure tomorrow
There are no guarantees about how long, healthy, or happy your retirement will be, but there are some simple ways to help ensure you’ll have the financial resources to take advantage of your opportunities and help meet the challenges ahead. Staying disciplined and consistent with these three hacks are great trails to follow on that journey.
