Everyone's goal is to have a happy and financially secure retirement. Having the goal is the easy part. The hard part is developing the right habits that help you reach that goal.
Small actions like choosing the $5 sandwich over the $10 burger can be helpful, but broader, more systematic, actions really move the needle when it comes to saving more money.
With that in mind, we asked three Motley Fool contributors to weigh in on what people can do to boost their retirement accounts.
Patrick Morris: One of the most effective ways to save for retirement is to take full advantage of whatever retirement options your employer provides to match your savings or contribute to your retirement.
These options almost always take advantage of the benefits of automatic savings. But not only that, they essentially provide a pay raise.
For example, some employers will match up to 100% of an employee's contributions to a 401(K). So if an individual is making $50,000 a year and parks $2,500 into 401(K) -- a little less than $100 every two weeks -- their employer will match every dollar of savings. By simply saving, they've already doubled their return.
Let's say you do this for 30 years and your salary grows by 5% each year and the stock market returns 8% annually. At the end of 30 years, you would've contributed $166,000 from your own paychecks. But thanks to the match of your employer and return of the stock market, you'd have over $1 million in savings.
If your employer didn't match it, your savings would still be high at $500,000, but nonetheless cut in half.
As Warren Buffett suggests, patiently parking money into a low-cost index fund (be sure to check the expense ratio of whatever savings options are available) over the course of a career is a key to saving for retirement.
Matt Frankel: One of the smartest savings moves you can make is to pay down high-interest credit card debt. Until you do this, setting aside money for retirement can actually be counterproductive.
If you owe $5,000 in credit card debt at 20%, it's going to cost you $1,000 per year in interest alone. Even if you are an awesome investor and can earn consistent 10% returns, you'll only earn $500 each year for every $5,000 you have invested. So, if you choose to put your extra money into an IRA instead of paying off your credit cards, you actually are producing negative returns.
While setting aside money for retirement is extremely important, paying off your credit cards should be priority number one. Plus, if you make it a habit to not carry credit card debt, you'll retire without the burden of large credit card bills hanging over your head.
Amanda Alix: If you are enrolled in a qualifying high deductible health care plan, a Health Savings Account allows you to contribute up to $3,250 each year as an individual; families can stash away $6,450. Once you and your spouse reach age 55, you may add an extra $1,000 to your contribution limits. Anyone with a qualifying plan may open a HSA, though the law requires that a trustee approved by the IRS administer the account.
As long as you use the pre-tax funds in the account for health-related expenses, you will never pay income tax on them. All interest and earnings accrue tax-free, as well. At age 65, you may use that money for any reason you choose – though you will have to pay tax on those withdrawals.