Much has been made about the financial precarity plaguing Generation X and Millennials for quite some time now. Drowning in medical bills and student debt, dealing with perpetually stagnant wages, and a general inability to accumulate a sense of financial stability let alone wealth, these generations have been hit pretty badly by both the Great Recession and the economic collapse spurred by the global pandemic. Things look just as difficult for Generation Z, and who knows how long it will be before everyone is able to find their footing. Within this dynamic, building an emergency fund, let alone saving up for retirement may seem like a fool’s errand. However, if you’ve somehow managed to squirrel away a bit of money for your eventual retirement, and remain unsure as to how to accumulate further wealth or make the most of it, you’re not alone. The following are a few tips to help you make the most of your retirement savings account.
Automate Everything
So, you’ve started a Roth IRA or Traditional IRA, and sporadically add fifty or a hundred dollars whenever you can. While the general maximum amount you can add to either account a year without being taxed is six thousand dollars, this still means that you can put away about four hundred or five hundred dollars a month. If you have the means to do so, but are simply bad about budgeting, then make sure to automate all of your contributions as soon as you can. Oftentimes, having a cushy nest egg set aside isn’t about how much money you make or have inherited – although, of course, it can make a difference – it’s about creating a habit of saving and sticking to it. Remain consistent in your dedication to growing your nest egg, and one way of keeping you from skimming a bit off your savings every month is simply automating all your contributions every month. As the saying goes, “out of sight, out of mind,” and sometimes, saving money for retirement is about playing funny psychological games with yourself to encourage you to save more without overthinking it.
Using an Employer Match
Maybe you haven’t opened your own IRA yet, and rely on your employer’s match. If so, that’s ok since the employer match is basically free money meant to help you build a retirement account. Even so, you will still need to contribute something of your own to get the maximum match from your employer. The money will be automatically deducted from your paycheck and will grow without being subject to heavy taxation, which is great. However, given the contribution limits for Traditional IRAs or your employer’s 401(k) plan, you may max out the latter. In that case, it makes sense to open your own IRA so that you can take full advantage of the amount you’re allowed to contribute to your accounts without getting taxed. Perhaps you should consult a financial advisor or further review your options, but an IRA would help offer you a more balanced portfolio in terms of low cost and low risk investment options.
Refinancing
Sometimes, you may need to refinance your retirement savings, much in the same way that you would consider refinancing your mortgage in order to receive a more favorable rate. While this is possible and not necessarily a bad idea, bear in mind that you cannot do that with most employer funded 401(k) plans. Also, the IRS does put limits on the amount you could borrow for the loan, so you will have to pay attention to that so as not to incur any unnecessary fees. If you want to maximize your retirement account, then of course, refinancing doesn’t always work in your favor. It largely depends upon your own personal circumstances, and expectations you have set for yourself as to when you plan to retire.
Build Another Retirement Account
Given the limits you have to deal with when it comes to the amount you can contribute to your IRA account, you may consider opening another, taxable retirement savings plan to help you get the most out of your retirement fund. This is especially helpful if you plan to retire early, and need to squirrel away even more money. If you have the means to do so, tax-advantaged accounts will help you accumulate wealth, while offering compound returns, so there are tangible benefits even if it is taxed.
While Millennials especially may have been hit hardest by the level of economic precarity everyone has been dealing with in the past few decades, it is definitely possible to change the course and build at least some kind of nest egg for yourself. The key is consistency no matter how small the amount, and keeping your eyes peeled for good financial advice.
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About the author:
Allen Brown is a dad of 3 kids and is a keen writer covering a range of topics such as Internet marketing, SEO and more! When not writing, he’s found behind a drum kit.