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Saving for retirement can seem like an overwhelming financial goal, especially when your budget already feels tight. That's why we've developed these tips about how and when to start saving for retirement, even with the cost of living on the rise. The sooner you start saving, the better. But even if you're starting later, there are still plenty of steps you can take to save for retirement and make your golden years enjoyable.

Regardless of where you are in your retirement savings journey, you can use these tips on how to save for retirement with and without investing.

Start Saving As Early As Possible 

The best way to save for retirement is by starting early. You can save money by investing early, even if you're starting with a small amount. The earlier you start, the less you have to save each month. How? The magic of compound interest.

What Is Compound Interest?

With compound interest, your assets can generate earnings that are then reinvested and can generate their own earnings. The earlier you start investing, the more compound interest can work in your favor. The more time your money has in the market, the greater your savings can grow without additional savings.

For example, by saving just $75 a month at 25 years old, you can save more by traditional retirement age than someone who starts investing $100 a month at 35 years old. Even two people who save the same amount annually will have very different retirement funds depending on what age they started saving. For example, if a 22-year-old and a 32-year-old both saved $5,000 each year, earned the same return on investment, and stopped saving at 67, the 22-year-old would have nearly double the retirement savings.

Any time you get an extra influx of cash, put the majority of it into your retirement savings account. If you get a larger-than-average tax refund or yearly bonus from your job and have nothing too pressing to spend it on, contribute to your retirement. The best part of a retirement savings account is watching it grow. And the larger it grows, the larger it can grow thanks to the snowballing effect of interest. Eventually, you should have enough money put away to finally retire from work and spend the rest of your days enjoying traveling, taking new opportunities, and living your life to the fullest.

One of the easiest tips for saving for retirement is to put your savings on automatic. When you set up retirement savings to come out of your account automatically each month, you don't even have to think about it. This is one way you can "pay yourself first," or ensure you put money where it needs to go without being tempted to spend it on something else. 

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Invest in a Retirement Account via Your Employer

Saving for retirement isn't a task you have to shoulder alone — your employer can also help you save for retirement. One of the easiest ways to save for retirement is to contribute to your workplace retirement plan. Typically, this takes the form of a traditional 401(k), but this could also be a 403(b) or an individual retirement account (IRA). 

Depending on the plan, you may be able to make pre-tax contributions to your account, which could both allow you to save for retirement and reduce your taxable income. Typically, nonprofit employers offer employees 403(b) plans, while for-profit employers offer employees a 401(k). By making 401(k) contributions, you can save more of your income without significantly impacting your monthly budget. 

Many employers offer to match up to a certain percentage of income put into a retirement plan. To make the most of your workplace retirement account, pay the full amount your employer will match. This is essentially free money, so you want to maximize it. For example, if you make $70,000 a year and your employer will match 50% of employee contributions up to 4% of your salary, you would contribute at least $2,800 and your employer would contribute $1,400.

Open an Individual Retirement Account (IRA)

However, not every employer offers a workplace retirement plan, so you should also know how to save for retirement without a 401(k). Similarly, if you are self-employed, you may be wondering what your options are. Fortunately, there are other retirement account options, including an IRA. 

Traditional vs. Roth IRA

If you're wondering how to save for retirement as an independent contractor or an employee without a workplace retirement account, an IRA can be a great option. You can choose between a traditional IRA and a Roth IRA to build your nest egg. The best option for you depends on your unique financial circumstances.

  • Traditional IRA: The contributions you make to your traditional IRA could be tax-deductible. Until you make withdrawals in retirement, your investment earnings can also grow tax-deferred, meaning you don't have to pay taxes now and can save significantly in the long term. Keep in mind that traditional IRAs come with mandatory distributions at age 72.
  • Roth IRA: A Roth IRA may be the right option if you meet the income limits. Unlike a traditional IRA, contributions to a Roth IRA are funded with after-tax dollars. The qualified distributions you take are tax-free, as long as holding period requirements are met. There are no mandatory distributions with a Roth IRA.

You may want to choose a traditional IRA if you want to deduct your contribution to reduce your taxes and would rather pay taxes on withdrawals in the future. On the other hand, you may want to choose a Roth IRA if you are willing to forgo reducing your taxes now for tax-free withdrawals in the future.  

IRAs vs. 401(k)s

Before you start investing, it's important to understand your options. If you have a 401(k) through your employer and want to open an IRA on your own, you should understand the advantages and disadvantages of both.

With a 401(k), you may get the benefit of an employer match, meaning you can save faster without any additional savings on your part. This is one of the greatest advantages of a 401(k), though not every employer offers to match contributions. You also don't pay taxes on your contributions, since they're made with pre-tax dollars. However, you will pay taxes when you eventually make withdrawals in retirement. The federal government also places a limit on how much you can contribute to your 401(k) each year. The current defined contribution limit is $61,000.

If a 401(k) isn't an option for you or you want to open an additional retirement account, you may want to consider an IRA. 401(k) plans and IRAs differ in their tax treatment. Depending on how much you make, you may be able to take a deduction on your IRA contributions up to a certain amount every year. 

With a Roth IRA, you contribute after-tax dollars. However, you won't have to pay taxes on the savings in your account again if you follow the withdrawal rules. If you are young with a lower income and don't pay a lot in income tax right now, a Roth IRA can be a great option. The current IRA contribution limit is $6,000. If you are interested in opening an IRA, review a few financial institutions that offer IRAs and ask for a table of the fees so you can accurately compare your options. 

Boost Retirement Savings With Catch-Up Contributions 

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Look into catch-up contributions if you are 50 or older. While you are limited in how much you can contribute annually to your 401(k) and IRA, once you reach age 50, you can exceed these limits via catch-up contributions. This is good news for those who haven't reached their savings goal and want to increase their annual savings to reach their target by retirement age. Keep in mind that there are catch-up contribution limits, however. 

  • 401(k) catch-up contribution limit: For a 401(k), the current catch-up contribution limit is $6,500. This limit also applies to 403(b) plans.
  • IRA catch-up contribution limit: For an IRA, the current catch-up contribution limit is $1,000. 
  • SIMPLE plan catch-up contribution limit: For SIMPLE plans, the current catch-up contribution limit is $3,000. 

If you are eligible and your savings aren't where you want them to be, consider making catch-up contributions to boost your retirement fund.

Increase Your 401(k) Contribution Percentage

If you're wondering how to increase your retirement savings, look first at your 401(k) contribution percentage. When you can, increase your contribution percentage to your workplace retirement plan, as this is one of the easy ways to save for retirement without any additional effort on your part. You may want to increase your 401(k) contribution percentage in the following circumstances:

  • If you have money left over every month: First, you can increase your savings per paycheck by one percentage point. If your retirement contributions are automated, you likely won't miss that money, and if you have some wiggle room in your budget, increasing your monthly contribution by a small amount could help you save even faster without any extra effort. Even a one percentage point increase could add up to significant savings over time.
  • If you get a bonus or raise at work: Adjust your contribution as soon as you get a bonus or raise at work. Deposit the difference directly to your retirement fund. This is an easy, painless way to save more for retirement. 
  • If you pay off a loan or debt: Paying off a debt, such as a car loan, credit card debt, or student loan, can free up room in your budget. Now that you have extra money to work with, you can increase your 401(k) contribution.
  • If you got an unexpected windfall: If you've recently come into some unexpected money, such as a tax refund, use the money to contribute to your retirement account.

Invest in Stocks

If you’re in your 20s or 30s, put your retirement money into stocks. You have a long time before you'll need to dip into your retirement savings, so you can tolerate a high level of risk. You can handle drops in the market because you have years to recover. Over time, there is always an increase when you invest in stocks. The younger you are, the more money you should have in stocks than any other investment vehicle. Stocks may have the greatest risk, but they also offer the greatest reward in the long run.

Though this investment strategy is not risky in your 20s and 30s, it can be risky later in life when you need the money sooner. For example, once you hit your 40s or 50s, you should start moving your money to safer assets, such as mutual funds and bonds. If there's a drop in the market shortly before you hit retirement age, you may not have enough time to recover the loss. This strategy will ensure you have your money when you need it.   

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Wait to Cash Out Your 401(k) or IRA 

Until you are ready to retire, wait to cash out your 401(k) or IRA. Though it can be tempting to use the funds now, those under age 59.5 will face penalties for cashing out. The money will also no longer be earning interest, disrupting the magic of compound interest. Keeping the money in your account for just a few extra years can mean significant savings. Additionally, if you withdraw the money from a traditional IRA or 401(k), you'll have to pay income taxes on that money. 

Your best strategy is to set it and forget it. Once you have your savings automated each month, consider that money spent so you won't be tempted to take it out early.

Delay Receiving Social Security 

Many Americans struggle to save enough money for a carefree retirement on their own. This is where Social Security comes in. Social Security is how you save for retirement without investing. These benefits can play a big part in your retirement, but keep in mind that the longer you delay receiving your Social Security benefits, the more you'll receive from your payments. 

As long as you can, delay receiving social security benefits. Sixty-two is the earliest you can receive social security, but you may not want to start receiving payments that early. For every year you delay up to age 70, you can increase what you will receive later. If you receive your benefits early, your payments will be reduced every month before full retirement age.

If you were born in 1960 or later, your full retirement age is 67, and if you start drawing your benefits at 62, your benefit will be reduced by 30%. For a $1,000 benefit, you would receive just $700 — that's a significant loss in your retirement years when you're on a fixed income. If you were born in 1943 or later, you can increase your Social Security benefits by 8% every 12 months that you delay your retirement. This benefit increase stops once you reach 70.  

Keep in mind that Social Security likely won't provide enough money to live on in retirement. The rules may change before you're ready to collect, and after taxes, your benefits may not cover all of your living expenses. While Social Security may play a role in your retirement savings, it's essential to save on your own to ensure you have enough savings to fund the retirement you want. 

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Start Saving for Retirement Today

The safest way to save for retirement is just to start — and start as soon as you can. At Atlas Credit, we provide access to affordable credit for underserved customers. If you have an immediate need for credit and banks, credit cards or other lenders have turned you down, we are here to help. 

You can complete an easy loan application online, over the phone or by coming into one of our several branch locations. The decision process is fast, and we look at more than just your credit score. If you are approved, you could be on your way with the money you need the same day. We have numerous storefront locations throughout Texas and Oklahoma and an online presence to service areas where we do not have physical storefronts.

We are not a payday or title lender. Our loans can help you establish and improve your credit score when payments are made timely. We also ensure that the loan we provide will fit within your budget. Apply for a loan from Atlas Credit or contact us at 903-258-9965 to learn more about our tips on saving for retirement.

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