4 Ways to Ramp Up Retirement Savings in 2017

If you’re not as prepared for retirement as you’d like to be, you’re not alone. According to a March 2016 report from the Economic Policy Institute, nearly half of American families having nothing saved for their later years. Among families that do, the average savings balance is $95,776.

The beginning of the new year is a great time to review your spending and savings habits and map out a plan for hitting your retirement goals. If you haven’t been setting aside as much for retirement as you’d like or you have yet to start, here’s how to get your plan on track.
1. Start with your employer-sponsored plan

If you’ve got a retirement plan available through your job, you’re off to a good start already. Stashing away some of your salary into a 401(k) is a relatively easy way to build up your nest egg.

So how much do you put in? At a minimum, you should aim to save at least enough to get the matching contribution if your employer offers one. Here’s an example of how valuable the match can end up being.

Let’s say you make $50,000 a year and you’re 35 years old. You’re saving four percent of your salary into your 401(k) each year. To qualify for a matching contribution, you’d need to bump that up to six percent.

If you keep your savings rate the same and earn a seven percent annual return until age 65, you’d have just over $196,000 for retirement. That’s a good chunk of cash but it’s nowhere close to the $1 million or more that experts usually recommend.

If you increased your savings rate to six percent to qualify for a 100 percent matching contribution, you’d grow your savings up to $588,000 instead. Raise that to 15 percent and you’d easily surpass the $1 million mark.

Check how much you’re currently contributing to your plan. If you’re not chipping in enough to get the match, consider increasing your salary deferrals so you’re not losing out on free money. If you are saving enough to qualify for the match, ask yourself whether you can afford to raise your savings rate by just one or two percent to start. It may not seem like much but it could make a huge difference in your retirement outlook over the long term.

2. Adjust your withholding
The average tax refund for 2015 was over $3,200. Getting money back at tax time may feel like you’ve hit the jackpot but all it really means is that you’ve paid more in taxes to Uncle Sam than you really needed to.

One way to remedy that is to change the amount of taxes your employer is withholding from your paychecks. That way, you’re getting those extra dollars that would normally be in your tax refund paid to you over the course of the year.

Having additional money coming your way on payday can help you balance out the increase you’re making in your 401(k) contributions. If you’re saving an additional amount in your plan that’s equivalent to what your refund would normally be, you’re not going to really miss anything when the money comes out of your check each pay period.

It’s a particularly good idea to check your withholding if you’ve experienced any major life events over the last year. If you got married or divorced, had a baby or bought a home in 2016, all of those things could affect your tax filing.

3. Tap your insurance plan for savings opportunities
If you’re enrolled in a high deductible health plan, you may have a built-in savings option right under your nose. These plans typically offer a Health Savings Account or HSA, which allows you to save money towards future medical expenses.

An HSA is different from a flexible spending account, which requires you to spend down what you’ve saved before the year is out. The money you save in an HSA can be rolled over each year and you don’t have to make withdrawals until you actually need to.

Your contributions are tax-deductible and when you pull money out for qualified medical expenses, there’s no income tax or tax penalty to worry about. If you withdraw money prior to age 65 for something other than health care, the IRS tacks on a 20 percent tax penalty, plus you have to pay regular income tax on the money.

Once you turn 65, however, you can make a withdrawal from a Health Savings Account for any reason with no tax penalty. You’d pay regular income tax on the distribution instead. If you weren’t able to save as much as you wanted to in your 401(k) or another qualified retirement plan, your HSA could be used to cover your expenses in retirement.

4. Opt for an IRA if you don’t have access to an employer’s plan
If your employee benefits package doesn’t include a 401(k) or you’re a freelancer flying solo, you’re not completely out of luck when it comes to saving. An individual retirement account (IRA) may be just what you need to get your retirement savings moving in the right direction.

As of 2017, you can save up to $5,500 in a traditional or Roth IRA. That’s a little less than $460 a week or $15 a day. When you break it down into smaller amounts, saving for retirement suddenly seems a lot less overwhelming.

If you don’t think you can save that amount, then the very first thing you need to do in the new year is review your budget. Look at how much money you have coming in and how much of it is going out. If you’re ending every month in the red, that’s an obvious sign that it’s time to reign in your spending and make some serious cuts. The more fat you can trim at the start of the year, the more you’ll have to save towards your retirement target.

About the author

Rebecca Lake

Rebecca Lake is a personal finance writer and blogger specializing in topics related to mortgages, retirement and business credit. Her work has appeared in a variety of outlets around the web, including Smart Asset and Money Crashers. You can find her on Twitter at @seemomwrite or her website,

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