5 Ways to Increase Your Retirement Savings

A common quote attributed to Albert Einstein is, “Compound interest is the eighth wonder of the world.” It is difficult to determine if he actually ever said that, but it does not matter. You save and invest money and earn a positive return (hopefully). And then that earned money earns more money! And that money earns money. And on and on.

It can be difficult to find the extra money to add to your retirement savings and let it grow and maximize the power of compounding interest over time.

Here are five things that you can start applying today to increase your retirement savings and build that nest egg as big as you can by the time you retire.

Use a Raise to Increase Your Contribution 

This is one of the easiest ways to save more for retirement. It can be hard to make the decision to live on less. Increasing your contribution means less money in your paycheck to live on.

However, say for example you get a 5% annual raise. Rather than opting for the extra channels in your cable package, instead contribute another 2-3% to your 401(k). Since it is extra money anyway, you will not have to take a hit to your quality of life.

Look for Areas to Reduce Your Spending 

Look for those areas like eating out or your morning coffee to cut unnecessary expenses. Do you really need a $3 cup of coffee? The average price of a Starbucks coffee is $2.75. It costs about a quarter to brew it at home. That is a $2.50 savings. 5 days a week/ 52 weeks a year, and that adds up to $650 a year in savings you could be putting toward retirement.

Ok, Ok. Hands off your Starbucks. Fair enough. The point is that for most people if they really give it some thought and write down what they spend their money on every month, they would find that there are certainly things that they spend money on routinely that they can live without. Put that extra money towards your retirement savings.

Pick up a Side Hustle

Sidehustlenation.com has a list of 99 side hustles you can choose from that you can do in your spare time to earn some extra cash. Some things require some unique talent, but other things like driving for Uber or Lyft, taking online surveys, or selling your junk on ebay are things almost anyone can do to earn extra cash that you can use to boost your retirement savings.

Take Advantage of Catch-up Contributions 

If you are age 50 or older, you can take advantage of something known as catch-up contributions. There are limits to how much you can contribute to your 401(k) or IRA. But if you have not maxed out your contributions over the years, the government may allow you to catch up by increasing the amount you can contribute.

Each type of retirement plan has a different catch up limit, so you should consult your tax professional or the IRS website before making catch up contributions.

Open an IRA 

401(k) plans will have a contribution limit of $19,000 starting in 2019. You may be able to contribute an additional $6,000 into an IRA on top of that. So, if you are already maxing out your 401k provided by your employer, consider opening an IRA to take advantage of an additional $6,000 in tax-deferred retirement savings.

These are just a few ways to boost your retirement savings to help build that nest egg faster. Remember, the more you contribute, the more there is to compound over a longer period of time. A little bit now can go a long way toward giving yourself a comfortable retirement.