What if you’ve done everything right, but still feel like you’re falling behind? Three experts explain how to catch up.
Many Americans already know the most powerful tool for retirement saving is a 401(k) with an employer match. There’s nothing better than saving a dollar and having your boss kick in up to 50 cents, which is the most common employer match.
It’s easier to save for retirement when you have that kind of support. But what if you’ve already maxed out your 401(k) contribution and you still don’t feel like you have enough set aside for retirement? We asked three notable personal finance experts for their advice on how to get ahead on retirement savings.
Step 1: Figure out where you are
“It’s important to familiarize yourself with all of the tools and resources available to maximize your income and allow for increased retirement savings,” says Vishal Jain, head of Financial Wellness Strategy & Development at Prudential Financial.
Jain’s company offers one of the best online tools for figuring that out. It’s called LINK by Prudential. This interactive site lets you quickly set up a free personal “retirement road map” with just a few clicks.
If you don’t feel comfortable just using online tools, Jain suggests, “you may also have access to professional advice through knowledgeable financial advisors, who can coach you on making the most of what you currently have saved and optimizing your savings plan going forward.”
Step 2: Pursue more tax-advantaged savings
If you have a high-deductible health plan, you might be able to allocate some of your income into a Health Savings Account, or HSA, according to Jain. You save two ways: First, like your 401(k), you contribute funds to an HSA on a pre-tax basis. Second, you can choose how to invest those contributions.
“More and more Americans have figured out that HSAs are a clever way to save for retirement,” says Debt.com chairman Howard Dvorkin. “HSAs date back to 2004, and they were designed to help cover out-of-pocket medical expenses for those with high-deductible health plans. But because you keep your HSA forever, you can save now and use it later.”
That means an HSA can rack up big pre-tax savings before you retire that can access it after you retire!
Step 3: Focus on your health
“Practicing healthy habits now can pave the way for an active and lower-cost future,” says Jain. “Many companies offer numerous health and wellness benefits, from discounts on gym memberships to life coaching, to stress relief seminars and more. You may also have the opportunity to earn a wellness incentive by completing a prescribed number of healthy activities each year.”
According to Jain: “Research shows that workplaces that incorporate both health and financial wellness programs produce happier and more productive employees.”
Step 4: Take care of the basics
If you ask Americans what they think will cost them the most in retirement, they often talk about traveling the world. In reality, maintaining stability during retirement comes down to more mundane expenses.
The Employee Benefit Research Institute reports that people aged 65-74 spend more than 40 percent of their income on housing and related expenses. Fidelity reports an average 65-year-old couple will spend $285,000 on healthcare costs.
Steve Rhode, aka the Get Out of Debt Guy, says saving for retirement is just one half of the equation. “You need to get out of debt now,” he says. “Every dollar you carry over on your credit cards is 15 to 20 cents going to a credit card company instead of your retirement fund.”
Getting out of credit card debt and paying off a mortgage before you retire will do more to secure your golden years than picking stocks to invest in, Rhode says.
“There’s no way to successfully retire and live on that budget if you can’t create and live on a budget while you’re working,” he says.
On that last point, both Jain and Dvorkin agree.
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