No matter how much money you make, how much time you have left before you retire, or how diligent you are about budgeting, saving for retirement is never easy. It's so challenging, one in three Americans has nothing at all saved for retirement, according to a survey from GOBankingRates. A Gallup survey also noted that 74% of Americans say they plan to work past retirement age.
Image source: Getty Images.
When their savings fall short, many workers have no choice but to work past the traditional retirement age. But it's not as difficult as you might think to boost your savings so that it's a little easier to retire when you want.
The earlier you start saving, the more time your money will have to grow -- which means that even small contributions to your retirement fund can add up to major gains over time. Even if you're struggling to save, there are a few small things you can do to give your fund a jump-start.
1. Contribute enough to your 401(k) to earn the full employer match
If you're lucky enough to work for an employer that offers matching 401(k) contributions, take full advantage -- otherwise you're leaving money on the table. The good news is that you likely won't need to contribute a lot more per month to max out your employer match, but that extra money can go a long way.
For example, say you're 40 years old, you currently have $10,000 in savings, you're earning $50,000 per year, and your employer will match 100% of your 401(k) contributions up to 3% of your salary -- which in this case would be $1,500 per year, or $125 per month. Let's also say that currently you're contributing $100 per month, which your employer matches. If you're earning a 7% annual rate of return on your investments, here's what your total savings would look like if you continue contributing just $100 per month ($200 with the employer match) versus if you bumped up your contributions to $125 per month to earn the full employer match:
| Age | Total Savings Contributing $200 per Month | Total Savings Contributing $250 per Month |
| 45 | $28,345 | $31,925 |
| 50 | $54,075 | $62,676 |
| 55 | $90,163 | $105,806 |
| 60 | $140,778 | $166,298 |
| 65 | $211,768 | $251,141 |
Calculations by author.
So by boosting your own monthly contributions by just $25, with the employer match, you're actually saving an extra $50 -- which can amount to roughly $40,000 over time.
2. Take advantage of the Saver's Credit
The Saver's Credit is a tax incentive to encourage workers to save for retirement, and in 2018, the credit is worth up to $1,000. To qualify, you must be at least 18 years old, you cannot be a full-time student, and you cannot be claimed as a dependent on someone else's tax return. You also must use a qualified retirement account, like a traditional or Roth IRA, 401(k), or SIMPLE IRA, in order to claim the credit.
Your annual income is also a factor, because if you're earning more than a certain amount per year, you might not receive the full credit, or you might not be eligible to receive anything. For example, for 2018, if you're married filing jointly and earning more than a combined $63,000 per year, you're not eligible for the credit at all. But for married couples earning less than $38,000 per year filing jointly, you can claim a credit equal to 50% of your total contributions for the year. Here's what you could be entitled to based on your tax filing status and your adjusted gross income (AGI):
| Percentage of Your Contributions You Can Claim | Married Filing Jointly | Head of Household | All Other Filers: Single, Married Filing Separately, or Qualifying Widow(er) |
| 50% of your contribution | AGI not more than $38,000 | AGI not more than $28,500 | AGI not more than $19,000 |
| 20% of your contribution | $38,001 to $41,000 | $28,501 to $30,750 | $19,001 to $20,500 |
| 10% of your contribution | $40,001 to $63,000 | $30,751 to $47,250 | $20,501 to $30,500 |
| 0% of your contribution | Over $63,000 | Over $47,250 | Over $31,500 |
Source: IRS.
For instance, say you're married and earned $35,000 in 2017. Your spouse was working part-time through 2017 and earned $18,000 that year, bringing your combined income to $53,000. Let's also say the two of you contributed a total of $2,000 to an IRA in 2017. Based on your income, you're able to claim a credit of 10% of your contributions, or $200.
The credit is only applicable for contributions up to $2,000 per person per year, though, so the maximum each person can claim is $1,000 (if you're able to claim 50% of your contributions). That's still a good chunk of change, though, and the benefits are twofold: You get up to $1,000 for the Saver's Credit, plus you're incentivized to contribute at least $2,000 per year to your retirement fund.
3. Automate and adjust your contributions
Automating your contributions is one of the easiest ways to ensure you're saving regularly, and it helps you build your budget around saving for retirement -- if you're automatically transferring a portion of each paycheck to your 401(k), you don't even get the chance to spend it elsewhere.
Also, research from Fidelity Investments shows that people who are automatically enrolled in their company 401(k) plan tend to save more over time. Researchers found that two-thirds of employees who were auto-enrolled in their 401(k) plan were able to increase their contributions over time -- in fact, the average employees increased their savings rate from 4% of their wages to 6.7% over the course of 10 years.
But it's not enough to simply "set it and forget it." The amount you contribute should increase over time, particularly when you get a raise, start a new job with a higher salary, or earn a bonus. Some employers take care of this for you (for example, if you're contributing a certain percentage of your salary to your 401(k), you'll automatically be saving more if you get a raise), but it's still a good idea to think about opportunities for saving a little more.
Even small adjustments can add up over time, so contributing an extra $100 from your tax refund or boosting your contributions by $30 per month after you get a raise can make a big difference down the road. For example, say you're 40 years old, you're earning $50,000 per year, you have $25,000 in your retirement fund, and you're contributing 3% of your salary, or $1,500 per year. At age 45, let's say you get a raise of $5,000, so 3% of your salary is now $1,650 per year. Then at 50, you get another $5,000 raise, so you bump your savings up to $1,800 per year, which you continue until age 65. Assuming you're earning a 7% annual rate of return on your investments, here's what your total savings would look like compared to if you had continued to contribute just $1,500 per year:
| Age | Total Savings When Contributing $1,500/Year | Total Savings When Adjusting Contributions |
| 45 | $44,294 | $44,294 |
| 50 | $71,354 | $72,278 |
| 55 | $109,308 | $112,450 |
| 60 | $162,540 | $168,792 |
| 65 | $237,201 | $247,816 |
Calculations by author.
So while saving an extra $300 per year gradually over 10 years might not seem like a lot, it can amount to around $10,000 by the time you retire. Also, if your employer offers matching 401(k) contributions, you can stand to gain even more. And by saving a couple of hundred dollars extra per year every time you get a bonus or a tax refund, you can further increase your savings.
Saving is never easy, but that doesn't mean it can't be a little less challenging. By taking baby steps and looking for every opportunity to stash away a few extra dollars, you'll be better prepared for a more comfortable, stress-free retirement.
