If you're worried about not having enough retirement income, you're no doubt in good company. It's natural to be concerned about a financial shortfall later in life, especially given that the cost of retirement can be tricky to estimate well ahead of that milestone.
Still, your goal may be to set yourself up with as much retirement income as you can. And making these moves this year could help you achieve that goal.
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1. Snag your full employer match in your 401(k)
You may not love your employer's 401(k) plan because the fees are high and the investment choices are limited. You don't necessarily have to max out your 401(k) if you feel that way. In that situation, an IRA could be a better choice for the bulk of your savings because that may result in a wider range of investment options.
But one thing you should do is contribute enough money to your 401(k) plan to snag your employer match in full. Not only does that sum represent free money for your retirement, but it's a sum you can also invest and grow into a larger number over time.
Let's say your maximum employer match this year is $3,000. If you contribute enough to claim that $3,000 in full and invest it at an average annual 8% return over the next 35 years (which is a bit below the stock market's average), your employer's 2024 contribution to your 401(k) will eventually be worth over $44,000.
2. Invest your savings aggressively if retirement is far away
You may be inclined to play it safe with your retirement portfolio for fear of losing money due to stock market volatility. And if you're on the cusp of retirement, then it's a good idea to focus on more stable investments, like bonds.
But if you're a decade or more away from retirement, then investing in the stock market is generally the way to go. You're more likely to generate stronger returns with a stock-heavy portfolio, and you'll need that growth in your portfolio to outpace inflation.
3. Set yourself up with assets that pay on an ongoing basis
There are certain assets you can invest in today and hold for years that could end up paying you regularly on a consistent basis. That allows you to earn extra income during your career that you can reinvest, and then continue to collect that income by holding those same assets when you're a retiree.
One example is dividend stocks. It's not a great idea to invest in a given stock for the dividend alone, since those aren't guaranteed or set in stone. But if you come across a strong business that happens to pay a generous dividend, you may want to consider it as an addition to your portfolio.
Similarly, you may want to consider putting some of your money into municipal bonds. Not only are you contractually entitled to regular interest payments as a bondholder, but with municipal bonds, that interest income is always exempt from federal taxes.
4. Consider an annuity -- but proceed with caution
If you like the idea of guaranteed income in retirement, then consider investing in an annuity, which is a contract between you and an insurance company. You'll pay a premium, and in return, you'll be entitled to payments down the line.
Funding an annuity could be a great way to get peace of mind. But do note that annuities can come with hefty fees, which is a big drawback. Also, you might get a stronger return on the money you invest in a portfolio of stocks you assemble yourself than in an annuity.
Your goal may be to set yourself up with a nice amount of income for your senior years. If you make these moves in the next 12 months, you may find that you're less financially stressed once retirement rolls around.
