Today, Social Security pays the average senior $1,543 a month. If that doesn't sound like a lot of money, well, it isn't -- not when you consider some of the expenses you might face as a senior, from housing to healthcare to the cost of staying busy in the absence of having a full-time job.
That's why saving for retirement is crucial. The money you manage to sock away in your IRA or 401(k) plan could not only supplement your Social Security benefits, but surpass them.
But saving for retirement isn't easy -- not when you have a world of bills to pay that never seem to stop coming. If you've struggled to save for retirement in the past, here are a few simple things you can do to grow your nest egg without breaking a sweat.
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1. Snag your full employer 401(k) match
Many employers that sponsor 401(k) plans also offer matching contributions, provided you put some money into your account out of your own paycheck. These matches are effectively free money, and snagging them in full could help you retire with a much larger nest egg.
Say your full 401(k) match would put an extra $150 in your retirement plan each month. If you snag that match every month over a 30-year period, and your 401(k) generates an average annual 8% return (which we'll discuss in just a bit), then your employer's contributions alone will add about $204,000 to your ending balance.
2. Bank your tax refunds
You may not get a tax refund every year, but when you do, sticking that money into your retirement plan could go a long way. Imagine you're 25 years away from retirement and get a $2,500 refund you weren't necessarily expecting. If you put that cash into your IRA or 401(k), and your retirement plan generates an average annual 8% return, that contribution alone will add a little over $17,000 to your ending balance.
3. Invest your money in stocks
The 8% average annual return we keep talking about? It's attainable if you invest your retirement savings heavily in stocks. Play it too safe by loading up on bonds, and you might slash your return in half, leaving you with a lot less money by the time your career comes to a close.
If you're worried about investing your savings in stocks because you don't know a thing about them, focus on index funds. These low-fee funds are perfect for savers who don't have the time or energy to research stocks individually, and since they're set up to track major market indexes like the S&P 500, they're a source of instant diversification, which is a good thing for your portfolio to have. Plus, stocks have a long history of performing well over time and recovering from crashes, so if you're not within a few years of retirement, they're a solid bet.
The more money you manage to retire with, the more comfortable your senior years are likely to be. These moves will help you wrap up your career with a higher savings balance -- and buy you financial freedom later in life.
