Nearly half of workers have less than $25,000 saved for retirement, according to a report from the Employee Benefit Research Institute, and of those workers, more than one-quarter have less than $1,000 stashed away.
Whether you're nearing retirement or your senior years are decades away, it's important to be setting aside at least some money now to prepare. That can feel nearly impossible when money is tight, but these three underrated ways to save can make it a little easier.
1. Take advantage of an HSA if you can
A health savings account (HSA) is essentially a retirement account designed just for healthcare expenses. You can contribute tax-deductible dollars to your HSA, let your money grow over time, then withdraw your savings tax-free as long as the money goes toward eligible medical expenses.
Unlike flexible spending accounts, HSAs don't have a "use it or lose it" policy. That means you can invest in an HSA now and let that money sit for decades until you need it. Considering the average senior couple can expect to spend nearly $300,000 on healthcare expenses alone in retirement, according to research from Fidelity Investments, the tax-free savings you'd get from an HSA can go a long way.
The one caveat to an HSA is that you have to be enrolled in a high-deductible healthcare plan to be eligible to contribute to one, meaning you need a deductible of at least $1,400 for individuals or $2,800 for families, as well as maximum out-of-pocket expenses of $6,900 for individuals or $13,800 for families.
2. Claim the saver's credit if you're eligible
The saver's credit is a tax credit for contributions to your retirement account, such as a traditional IRA, Roth IRA, or 401(k). In other words, by simply saving for retirement, you can reduce your tax bill.
To be eligible for the credit, you must be at least 18 years old, you cannot be claimed as a dependent on anyone else's tax return, and you cannot be a student.
The maximum credit you can receive is 50% of your annual retirement account contributions (up to $2,000 for individuals and $4,000 for joint filers), and to earn the maximum amount, your adjusted gross income cannot exceed $19,500 per year for individuals or $39,000 per year for married couples filing jointly. If your income is higher than that, you may still qualify for a credit, but you might only receive a credit of 20% or 10%. If your annual income exceeds $32,500 for individuals or $65,000 for married couples filing jointly, you don't qualify for a credit at all.
3. Increase your savings rate by just 1%
Retirement can be incredibly expensive, but you don't need to boost your savings by hundreds of dollars per month to save a significant amount.
In fact, saving just 1% more can potentially help you save tens of thousands of dollars for retirement. According to research from Fidelity Investments, if you're 35 years old and earning a salary of $60,000 per year, saving an additional 1% of your salary -- or just $12 per week -- can boost your total savings by nearly $85,500 by retirement age.
Preparing for retirement can be tough, but it may not be as challenging as you think to give your savings a jump-start. Every little bit counts, and the small steps you take now can add up to thousands of dollars in savings by retirement.