Higher living costs don’t have to get in the way of your goals.
Inflation has been battering consumers since mid-2021. And while the pace of inflation has thankfully slowed down in recent months, living costs are still considerably higher than usual. That’s forced a lot of people to make changes to the way they approach retirement savings.
In a recent survey by Allianz Life, 55% of respondents said they’ve either stopped making contributions to a retirement savings plan due to inflation, or they’ve reduced the amount of money they’re putting in. Worse yet, 45% of respondents said they’ve had to take a withdrawal from an IRA or 401(k) plan due to rising inflation.
But cutting back on retirement savings could put you in a tough position later in life, when you really need that money to live on. So you’re better off staying the course and trying to save as much as you can for your senior years, despite inflation. That may be easier said than done, but here are a few ways to keep up with your savings and help them grow at a time when living costs are soaring.
1. Snag your full 401(k) match
You may not have the ability to max out your 401(k) this year, or even ramp up your savings rate within that plan. But one thing it definitely pays to do is contribute enough money to claim your company match in full. Not only is that free money for retirement, but it’s money you can invest and grow into a larger sum over time.
In fact, let’s say your full employer match amounts to $3,000 this year. If you invest that money at an average annual 8% return (which is a bit below the market’s average) over 35 years, you’ll grow it into over $44,000, which could make a huge difference later in life.
2. Make sure you’re investing aggressively
The stock market has been volatile since early 2022, so you may be hesitant to go all-in on stocks in your retirement plan. But if you load up on stocks, you might generate a strong enough return to help compensate for smaller contributions. And if you’re not comfortable choosing individual stocks for your nest egg, opt for broad market index funds instead.
3. Get creative about generating income
You may need to spend more of your paycheck on things like food and utilities these days, leaving you with less money for retirement plan contributions. But that doesn’t mean your savings have to fall by the wayside. The gig economy is booming these days, so if you’re willing to put in a little time on a side hustle, you can use your extra earnings to fund your IRA or 401(k).
It’s easy to see why inflation is impacting retirement savings. But that doesn’t mean you have to resign yourself to falling behind. If you manage to find a way to keep up with your IRA or 401(k) contributions, you’re apt to be a lot happier for it once retirement rolls around and you’re reliant on your savings to supplement your Social Security benefits.
