It's not uncommon to feel like you're behind on retirement savings. But you should know that if you're not even midway through your career yet, there's plenty of time to play catch up if your IRA or 401(k) could use a boost.
That said, if your savings don't seem to be growing, there could be a reason why. Here are three things that may be stopping you from supercharging your IRA or 401(k).
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1. Large amounts of debt
The more debt you have, the more money you're spending on interest. And every dollar you spend on interest is money that can't go into your retirement plan.
Take some time to assess your debt and see what it's costing you. Also, pay attention to how much of your income it's monopolizing.
If you agree that you're in over your head, you may need to make some temporary but meaningful lifestyle changes to shed some of your debt -- especially the high-interest variety. That could mean getting a roommate, downsizing to a smaller place, or working a side hustle to drum up more income.
2. Conservative investments
It's natural to worry about investing in stocks. A single market event could send your portfolio value plummeting.
But if you're many years away from retirement, you have plenty of time to ride out market downturns. And if you shy away from stocks, you might cause your savings to stall.
Imagine you have $20,000 saved for retirement at age 27 and you plan to retire in 40 years. A conservative portfolio with a 5% yearly return might grow your $20,000 into about $141,000. A stock-heavy portfolio with an 8% yearly return might grow your $20,000 into more than $434,000.
If you're nervous about choosing stocks individually, look at S&P 500 index funds or ETFs (exchange-traded funds). They give you broad exposure to the stock market without forcing you to choose specific companies to invest in.
3. High fees
The more your investments cost you, the slower your money is apt to grow. If you're investing in costly mutual funds with large expense ratios, you may be doing your nest egg a disservice. And if you have your 401(k) in a target date fund, that, too, may be costing you a lot.
Always compare investment costs before choosing one over the other. And that applies to your actual retirement plan, too. If you have a 401(k) that charges expensive administrative fees (meaning, fees well above the 1% mark), it's a sign that you may want to keep your money elsewhere.
If your savings aren't where you want them to be, it's important to uncover the reason why. From there, you can work on making changes, whether it's paying down debt, investing more aggressively, or swapping costly investments for low-fee alternatives.
