There's a reason so many people feel pressured to save well for retirement. Without a sizable nest egg, retirement has the potential to become one giant disappointment. This may be especially likely if Social Security cuts end up coming down the pike.
But it's hard to consistently fund a retirement plan when living costs remain stubbornly high. And a good 42% of respondents say inflation is killing their dreams of retirement, according to a recent report by Natixis.
If inflation has been getting in the way of your savings efforts, there are steps you can take to try to work around it. Here are three to employ.
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1. Snag your full employer match in your 401(k)
If you're fortunate enough to have access to a 401(k) plan with an employer match, then you have a prime opportunity to score some free money in that account. That helps take the pressure off your earnings.
Remember, too, that the money your employer contributes to your long-term savings can be invested and grown into a larger sum over time. In fact, let's say you're 30 years old and are eligible for a $5,000 employer match in 2024, provided you manage to contribute that much to your 401(k) yourself. If your plan's investments deliver an average annual 8% return over time, which is a bit below the stock market's average, that $5,000 employer match will be worth almost $74,000 by the time you turn 65.
2. Invest aggressively so your money goes further
The 8% return from the example above hinges having on a retirement plan portfolio that isn't overly conservative. If you play it safe by loading up on bonds, a return like that is unlikely. Rather, go heavy on stocks while retirement is years away, so you can generate strong returns that grow your balance nicely.
If you're not super confident in your ability to hand-pick stocks, you should also know that there's nothing wrong with falling back on index funds. The benefit there is that you can enjoy instant diversification without having to do a ton of research on the investments you're choosing. You mostly need to focus on fees and historical returns.
3. Turn to the gig economy for extra income
As of November, inflation was still up 3.1% on an annual basis, as per the Consumer Price Index. So you may be struggling to part with any amount of income for retirement savings purposes.
If that's the case, the gig economy could come to your rescue. There's ample opportunity these days to pick up side work that could boost your income and make funding a retirement plan far more feasible.
While you don't have to commit to a side gig indefinitely, you may opt to do so if you find one that's easy to work into your schedule. That will only make it easier to continue saving even as inflation cools.
It's easy to see why inflation might be wreaking havoc on your retirement goals. But you don't have to let it. Instead, take advantage of free money you're eligible for, invest aggressively, and push yourself to hold down a second job for a period of time if that's what's needed to ride out this wave of elevated living expenses.
