Many adults reach a point when they’re trying to save for retirement. You usually arrive at this moment when you’re making enough money to cover your bills and have disposable income left over.
It’s tempting to splurge on unnecessary items when you get to this stage, and while you can do that to some extent (everybody needs a little something for entertainment), it’s best to start putting money away for your eventual retirement. The sooner you get started on that, the better.
Before we launch into how to do this, we should stress that it’s important to prioritize paying your most crucial bills before you start putting money away. If you need to calculate loan payoff options or you owe the IRS tax payments, it’s not the best time to start stashing money in retirement accounts…yet.
But if you’re ready and want to boost your retirement savings in the coming year, some particular strategies will help. We’ll talk about three of them right now.
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1. Health Savings Accounts
Assuming you have some disposable income, opening up a health savings account, or HSA, and contributing to it is one thing you might do in 2022. While people typically set them up to prepare for eventual healthcare costs, HSAs are very flexible.
HSAs offer some notable benefits. One of which is that HSA funds don’t expire. If you contribute to one in 2022, you can use that money to cover short-term medical bills, or you can save the cash to use when you’re older. You can also invest the funds in your HSA that you don’t use immediately so they can grow over time.
Any withdrawal from an HSA is tax-free, provided you use that money for medical expenses. Also, after you turn 65, you can withdraw from an HSA account for any purpose without penalties, making them ideal retirement savings vehicles.
2. Invest Aggressively
If you’ve set up a retirement plan and are putting money into it every year, you probably hope that it will grow into a sizeable nest egg by the time you retire. Putting money into a 401K is great, but it’s important to know how your funds are invested, particularly how aggressively they’re invested.
If you are still several years away from retirement, many financial advisors would recommend that you load up on stocks that allow maximum growth. Reallocating your portfolio (with the help of a professional) could help you boost your retirement savings this year in a big way.
3. Take Advantage of the Maximum 401K Match
If your job offers a 401K, you should set that up in 2022 if you have not done so yet. It’s always a good idea to contribute as much as your employer will match—this is basically free money and a great way to boost your retirement savings.
Companies that sponsor 401K programs usually match funds up to a certain amount. That could be as much as 5% or even more in some instances.
To take advantage of the match and maximize your contributions, put a percentage of each paycheck (at least up to the amount your employer will match) into your 401K, and make these contributions automatic.
4. It’s Smart to Focus on Retirement Savings
A new year often renews our motivations, and so the start of the year is a great time to focus on saving for retirement. If you’re focused on boosting your retirement savings, consider setting up a health savings account, investing aggressively with your 401K, and getting the maximum amount of matching funds your workplace offers.
If you take all of these actions, you should find yourself much further down the road toward a comfortable retirement when the end of 2022 rolls around.
