Identifying effective ways to save for retirement requires three critical components: a personalized approach, careful strategic thinking, and a plan capable of spanning 10 years or more.
That’s not as hard as it may sound. To prove it, we’ll walk you through four simple ways you can help boost your retirement savings, even if you’re already on a great track.
1. Compound Your Savings with Compound Interest.
The impact of compounded interest on a retirement savings plan is something to behold. Check out this example. Earning just 10% interest on $1,000 bumps you up to $1,100—a $100 increase. From there, 10% of that $1,100 is $110, and 10% of $1,210 is $121. That brings your total to $1,331 from an initial $1,000 if you were to experience just three periods of 10% growth.
If you’re already leveraging compound interest in your retirement strategy, great. If you’re looking for additional paths to retirement savings, it may be worth your while to look closely at gold.
Gold’s price increase over the long run can make holding it a viable retirement strategy for you to consider, too.
For example, if you bought one ounce of gold for $263.80 on October 27, 2000 as a part of your retirement plan, you’d now be holding an ounce of gold with a market price of around $1,563.30. While it’s not necessarily compound interest, the price difference reflects an increase of almost 492%%.
2. Save 1% More Each Month.
Because the most effective retirement savings plan is typically one that plays out over decades, even incremental changes can make a massive difference.
Fidelity Investments determined that a 25-year-old worker earning $40,000 a year who increased her savings rate by just 1% (roughly $33 per month in the first year) could realize an additional $190 per month in retirement savings.
That’s 1%. Increasing the percentage of savings—and it isn’t tricky to top 1%—can result in an even more significant retirement income benefit.
Suggestions for where to find 1% or more from your budget include:
- Refinancing your home
- Carpooling to work
- Consolidating student or other loans
- Requesting a credit card rate reduction
- Eating out less
There’s an additional benefit to this “small steps” strategy. It can also be a great way to tackle the learning curve of a new financial strategy.
3. Open a Self-Directed IRA.
With a Self-Directed IRA, you assume direct control over the funds in the account rather than handing that control off to a custodian. Given the type of account and the fact that you control it, a more extensive array of assets come into play. You can include the following assets, to name a few:
|Paper-Based Assets ->||Stocks, bonds, and mutual funds|
|Non-Paper-Based Assets ->||IRA-approved precious metals, real estate, livestock, and franchise interests|
Paper-based assets tend to receive the majority share of asset attention; however, there are two reasons to consider non-paper-based assets like IRA-approved precious metals: one, the possible protection precious metals can offer your financial legacy, and two, the peace of mind that a safe-haven asset can deliver during troubling economic times.
What is an IRA-approved precious metal? IRA-eligible gold and silver coins and bars meet strict Internal Revenue Code requirements. Those requirements include a minimum fineness of .995 (with the exception of Gold American Eagles) and production by a national government mint or accredited refiner/assayer/manufacturer.
The broader asset selection available to self-directed IRAs enhances their appeal and potential benefits for many people developing a retirement strategy.
4. Maximize Catch-Up Contributions.
Catch-up contributions allow individuals age 50 and older to put away additional money—up to $6,000 for a 401(k) plan—for their retirement, exceeding their plan’s regular contribution maximum.
As the name implies, catch-up contributions help people preparing for retirement make up for any lost savings opportunities in previous years.
If you feel like you’re playing catch-up on the idea of catch-up contributions, you’re not alone. More than a quarter of baby boomers are unaware of their ability to make such contributions to a 401(k) plan, U.S. News & World Report notes.
While almost all 401(k) plans offer catch-up contributions, only 15% of participants take advantage of them. If you’re at or approaching 50 and seeking every possible retirement savings advantage, maximizing your catch-up contributions should be on your “how to save for retirement” action plan.
Your Golden Guide to Retirement Savings
No matter where you are in your journey toward retirement, it’s never too early or too late to further enhance plans for your financial future. Physical gold and silver can work right alongside your current strategy and often add to it. Learn more about the benefits of a Self-Directed IRA. Call U.S. Money Reserve to see how our Gold Standard Precious Metals IRA program could help you save more for retirement.