6 Ways to Save More for Retirement if You Aren’t Rich

Saving for retirement is a major challenge for most Americans, and with good reason. When you have immediate bills to pay, putting aside money for a distant future may not seem like a priority. Unfortunately, if you don’t start saving early and save aggressively throughout your lifetime, you could find yourself facing major financial struggles in your later years.

The good news is, there are options to build a hefty nest egg even if you don’t make a fortune. In fact, these six techniques can help everyday Americans save much more money so they can enjoy a retirement free of financial worries.

Colorful 401(k) letters next to piggy bank.

Image source: Getty Images.

1. Make good use of your “third” paycheck 

If you’re like most people and get paid biweekly, you’ll receive 26 paychecks over the course of the year. That means that twice a year, you’ll get three paychecks instead of two.

If you build your monthly budget based around two biweekly checks most months, then you can treat that third check as extra and put it right into your retirement savings account. This alone should allow you to set aside just over 7% of your annual income, since you’ll be investing two out of the 26 paychecks you get throughout the year.

2. Use your credit card rewards 

There are some credit cards that allow you to deposit your rewards directly into an investment account. Choose one of those for your everyday card so every purchase will help you invest money for your future. This allows you to effortlessly build a retirement nest egg, which can be a far more valuable use of credit card points than just cashing them in for plane tickets or merchandise.  

3. Bank your raises

When you get a salary increase, immediately divert some — or even all — of the extra money into retirement savings. Since your budget and spending are built around your current income, you don’t need the additional money now anyway. If you divert it to savings right away before you get used to living on it, you’ll never miss the money.  

4. Take advantage of tax credits

There are ample opportunities for tax-advantaged retirement investing, especially if you aren’t rich. You can make pre-tax contributions to a 401(k) if your employer offers one as well as to a traditional or Roth IRA. Since you don’t pay taxes on the money you’re contributing, each contribution costs you less, and the government essentially gives you free money for retirement. If you contribute $1,000 and are in the 22% tax bracket, this could save you up to $220 on your tax bill. Your $1,000 contribution would cost you only $780.

And if you make under $32,500 per year as a single tax filer or $65,000 per year as a married joint filer, you can also take advantage of the savers credit. This provides a tax credit worth between 10% and 50% of the first $2,000 in retirement contributions each person makes, which means married joint filers can get up to $2,000 in free money for retirement.

5. Claim your full employer match

If your employer offers a workplace 401(k), chances are good they’ll also match part of the contributions you make toward it. For example, your employer may match 50% of your contributions up to 6% of your salary. If your employer matches contributions, they are giving you free money. You should claim every dollar of it that’s available to you by making sure you invest enough in your 401(k) to get the full match.  

6. Use coupons and immediately invest the savings

Coupons can help you save on purchases both online and in store. You can get them from your local paper, buy them online, or print them for free. When you use them to reduce costs, don’t just squander the savings; immediately transfer whatever amount you were able to save into your IRA. This way, the money you’ve saved can be invested and start working for you. 

By following these six simple steps, investing more for retirement should be effortless. That extra money will grow over time thanks to compound interest and can have a surprisingly big impact on your financial security in your later years.

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