Many investors are missing out on one of the most valuable parts of retirement planning: time.
A Bankrate survey found that nearly 36% of respondents have never had a retirement account.
Not saving enough for retirement is a major financial regret for many people, the research found.
There is a key reason for that remorse. For every year you don’t invest and allow your money to accumulate, it could cost you tens of thousands of dollars in the future.
More on Personal Finance:
Try these tips to save gas
Recession is ‘likely,’ says former SEC chief economist
It is a good time for young investors to put money in the market
It is true that there are many obstacles that can stand in your way if you want to save more. These can range from not having access to a retirement savings plan at work to meeting other financial goals, such as saving for expensive items like a family home or a child’s college education, or paying off debts like mortgages , credit cards or student loans. .
But there are steps you can take now to save more today and live more comfortably later.
Increase your savings
It can be hard to know how much is enough when it comes to your retirement savings rate.
Many experts advocate a 15% deferral rate.
That may surprise some workers, considering automatic enrollment rates can be as low as 3% or less if those plans also have automatic annual increases, according to asset manager Vanguard.
Experts generally recommend contributing enough to at least get an employer matching contribution, if one is available. Also keep in mind that you’ll need to save even more if you’re also investing on behalf of your spouse.
Increasing your retirement savings deferral rates even a little as you receive raises or promotions can have a big impact on your total over time, according to Greg McBride, chief financial analyst at Bankrate.
“Getting into the habit of increasing how much you’re saving can go a long way,” McBride said.
Invest in an IRA
One reason many workers don’t save more is because they don’t have access to a retirement savings plan at work.
Only 64% of private industry workers have a defined contribution plan like a 401(k), according to T. Rowe Price.
As long as you or your spouse has income from work, you can open an individual retirement account on your own and save that way, McBride said.
For younger workers, the opportunity to save in a Roth IRA with money they’ve already paid taxes on could allow them to earn decades of tax-free compound growth, he said.
There are limits to how much you can save each year through a 401(k) or IRA plan.
In 2022, workers can save up to $20,500 in their 401(k) plans. The limit for traditional and Roth IRAs is $6,000.
If you’re age 50 or older, you can save even more through additional contributions: an additional $6,500 for 401(k)s and another $1,000 for IRAs.
Consider working a little harder
Geber86 | vetta | fake images
If you’re close to retirement age, another strategy to consider is working longer.
Even a year or two of extra income can help bolster your retirement financial security, McBride said.
The reason: It’s more time you have to save and allow your assets to grow, and less time your money has to support you in retirement.
Wait to claim Social Security benefits
Working longer can also help you delay applying for Social Security, which can significantly increase your eventual monthly retirement benefit check.
Eligible workers can claim for the first time at age 62, but will have reduced benefits for life.
By waiting until full retirement age, usually 66 or 67, they will receive 100% of the benefits they earned. And for every year they wait until age 70, their benefits go up even more.
The difference between claiming at 62 and 70 years can reach 77%.
“You basically get a permanent raise every year that you can delay your Social Security payment from age 62 to age 70,” McBride said.