Ways to Increase Your Retirement Savings in 2023
February 7, 2023
Do you want to increase your retirement savings in 2023 but are still determining which route to take? Retirement should be a time of fun, relaxation, and adventure. Of course, to do all the things on your list, you need adequate funds. Fortunately, you can learn how to increase your retirement savings with a few simple tips.
Boost Your Retirement Savings This Year
Even if you start saving late, you can still build a substantial nest egg.
Review the Retirement Contribution Rules
The Internal Revenue Service limits the amount you can put into an independent retirement account or 401(k) every year. Contributions have certain tax advantages, so caps prevent people from abusing these accounts to avoid paying taxes.
Contribution limits periodically rise in response to inflation. You should check the new rules in January to see how inflation has affected this.
Additionally, the IRS occasionally changes the catch-up rules to account for times of economic hardship. Catch-up contributions allow individuals to put more into their retirement accounts than usually allowed. However, they must be 50 or older.
Meet the Full Employer Match for Retirement Savings Accounts
Many employers offer retirement matching as a benefit, usually as a percentage. For example, if your employer offers a 50% contribution match rate and you put $1,000 into your 401(k) that year, that's an extra $500 for a total of $1,500. Most companies cap these contributions, so check the policy before planning your savings strategy.
For many, this is an easy way to boost contributions, as the funds are essentially free. If you can't meet the IRS cap, utilize employer matching to maximize savings.
Consider Opening a Roth IRA Account
There are two types of IRAs. One is traditional, and the other is a Roth. Anyone can open a traditional IRA as long as they can meet the opening deposit. In contrast, Roth IRA accounts are only available people who generate under a specified yearly amount.
Each account type also offers different tax advantages. You must pay taxes on the funds put into a Roth IRA, but you can withdraw money tax-free. For those on a fixed income, this can make a huge difference. Traditional IRAs offer the opposite: You contribute funds before taxes, then have to pay when you take money out. The result is a lower taxable income for the contribution year.
Additionally, there are rules about when you can withdraw funds. You can withdraw from a Roth IRA at any time, whereas you must wait until you hit the age of 59 1/2 before withdrawing from a traditional IRA. If you take out money beforehand, there's a 10% penalty on the amount withdrawn.
Set a Yearly Retirement Contributions Goal
Retirement planning should always start with a goal. How much do you need to live comfortably? There are a few factors to consider:
- When do you plan to retire?
- How long will you live?
- How much will you spend each year?
While you can't know precisely how many years you'll live in retirement, you can make a reasonable estimate based on census data. You have more control over when you retire and how much you spend. The earlier you leave the workforce, the more money you'll need to set aside. Additionally, costs increase about 3% annually due to inflation, so keep that in mind during calculations.
About 1891 Financial Life
At 1891 Financial Life we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.
Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.