With uncertainty about future Social Security benefits and other sources of income, focusing on your retirement plan savings is critical. Even small saving increases, especially if implemented on a routine basis, may add up to more savings at retirement. Regardless of your age and years to retirement, most financial planners think that it makes sense to save the maximum in your plan, as much as your budget will comfortably allow.
Like many of today’s workers, you may envision your retirement income stemming from a mix of sources, such as your employer plan, Social Security, and any Individual Retirement Accounts (IRAs) or annuities you may have. You’ll have control, to certain degrees, over some of these sources—such as the amount you contribute to your plan account. Other income sources, such as Social Security, will likely be out of your control.
All told, the possible changes, the varied philosophies, and the many financial models make predicting future income from Social Security very difficult. That’s one reason why focusing on your employer plan is so important.
Contribute as much as you can
Increasing your plan contribution today may help provide the potential for a larger plan balance tomorrow. While there are no guarantees, if your plan allows it, even small saving increases, especially if implemented on a routine basis, can add up to more savings at retirement. Plus, that’s over which you do have control.
Regardless of your age and years until retirement, financial planners generally believe it makes sense to save the maximum in your plan, as much as your budget will comfortably allow. Another good idea is to increase that amount on a regular, systematic basis.
Save your raise
If your employer gives you a salary increase, you can use the timing as a schedule to “give a raise” to your retirement plan. With this approach, you routinely increase your plan contribution and do so in an amount equal to all or part of the additional pay. If you increase your savings in sync with the timing of your raises, you probably won’t feel the pinch as much—and your long-term goals may get a potential boost. Or, you can take a seasonal approach, and increase your contribution amount at a specific time each year.
Run the numbers
You may find it helpful to review scenarios with different assumptions and expected investment returns. To start, search online for a “free retirement plan calculator.” Work through various situations, modeling the particulars to match your own circumstances. While your numerical results will be unique to your situation, the message will probably be universal: “Control what you can. Save more today, to give your retirement plan a better chance to grow for tomorrow.”
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. Investing involves risks and you may incur a profit or a loss. This article is not designed or intended to provide financial, tax, legal, accounting, investment, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.