With retirement becoming increasingly expensive, saving independently is all the more crucial -- especially since Social Security by itself won't be enough to pay for retirement. Thankfully, there's some good news in this regard: 401(k) contribution limits are increasing in 2019, which means workers will have a greater opportunity to pad their nest eggs.

Currently, workers under 50 can contribute up to $18,500 a year to a 401(k), while workers 50 and over can contribute up to $24,500. Once 2019 kicks off, these figures will rise to $19,000 and $25,000, respectively. This means that no matter your age, you'll have an opportunity to sock away an extra $500 next year in your 401(k), and if you save in a traditional 401(k) rather than a Roth, you'll also knock $500 off your taxable income in the process.

Man holding up white card with 401K written in red

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If your goal is to max out your 401(k) in 2019, make sure to take the appropriate steps to defer that additional $500 (it's probably just a form or request to your payroll or HR department). That said, if you do take advantage of these increased limits, you'll probably be in the minority, since the average American isn't apt to even notice the change.

Americans need to do better on savings

Most workers are advised to sock away anywhere from 15% to 20% of their earnings for retirement, and if you have access to a 401(k), you have a solid opportunity to do just that. Most Americans who have 401(k)s, however, don't come close to maxing out. The average contribution rate for 401(k) plans was 6.8% of salary in 2017 -- the same as it was a year before, according to Vanguard. Since the average U.S. worker today earns roughly $46,641 a year, that translates to an annual contribution of $3,172, not including employer matching dollars. And that's nowhere close to the $19,000 workers that will have the option to contribute next year.

Ramping up your savings game

If you're an average earner, maxing out a 401(k) plan may not be in the cards for you -- at least not right away. After all, to put away $19,000 a year (assuming you're under 50) would mean to give up over 40% of your income if you earn what the typical American does. That said, there are several steps you can take to do better.

First, look at your budget (or create one if you don't have one yet) and find some corners to cut. That could mean canceling your rarely used gym membership, dining out less frequently, or unloading a car if you can get along by taking the bus. Next, think about getting a side hustle. Of the millions of Americans who hold down a second job, 14% do so for the express purpose of boosting their retirement savings rates. Lastly, if you're getting a raise next year, send it directly into your 401(k). This way, you'll remove the temptation to spend that money elsewhere -- and chances are, you won't even miss it.

The more you're able to save in your 401(k), the more financial security you buy yourself in retirement. Even if maxing out at $19,000 or $25,000 isn't an option next year, it never hurts to do a little bit better than you did the year before. In fact, if you were to save an extra $500 a year over the next 20 years, you'd add about $20,500 to your nest egg on top of the amount you were already saving, assuming your investments generate an average annual 7% return. Therefore, while a small increase like $500 may not seem like much at first, it could work wonders for your retirement in the long run.

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