7 Ways to Build Your Retirement Savings — No Matter Your Age

Saving for retirement is a goal that most Americans share. But unfortunately, large numbers of us fall short when it comes to taking the steps needed to realize this important, long-term life objective. In fact, according to research, roughly 25% of American adults have no retirement savings. And further, more than 20% of Americans don’t set aside any portion of their yearly income in hopes of achieving their short- and long-term financial goals.

A time-sensitive task

The lack of savings success among significant portions of U.S. consumers is understandable. For many Americans navigating everyday expenses, monthly bills and unexpected costs, it can be challenging to live from paycheck to paycheck — much less take part of their hard-earned income off the table and devote it to savings. 

But no matter how close or how far away your anticipated departure from the workplace may be, it’s never too early or too late to start saving for your future retirement. That said, of course, the sooner one gets started with saving for retirement, the better. 

Consider these varying financial scenarios for a consumer who starts saving for retirement at three different ages — each with $200 per month set aside and an assumed 8% annual growth rate on their retirement investment:

• When the savings start at age 35, the total funds contributed by age 65 equal $72,000. Add in the $209,710.12 of anticipated interest earned on these retirement funds, and this consumer’s total retirement-savings balance would equal: $281,710.12.
• When the savings start at age 40, the total funds contributed by age 65 equal $60,000. Add in the $121,798.19 of anticipated interest earned on these retirement funds, and this consumer’s total retirement-savings balance would equal: $181,798.19.
• When the savings start at age 45, the total funds contributed by age 65 equal $48,000. Add in the $65,799.81 of anticipated interest earned on these retirement funds, and this consumer’s total retirement-savings balance would equal: $113,799.81.

A big benefit of starting your savings activities as early as possible lies in the power of compound interest. This concept is the primary reason that, while contributing only $24,000 more in retirement-account funding, the consumer above who started saving at age 35 ends up with more than $165,000 in additional retirement funds than the consumer who started at age 45.

7 strategies for retirement-savings success

Ready to put your retirement-savings plan into action? Or do you already have a retirement account established, but would like to step up your savings? 

Whether your preferred vehicle for retirement savings involves a savings account, a 401(k), an IRA or another option, consider these seven tips for putting more money toward reaching your retirement-savings goals:

1. Save as much as you can spare — This may seem obvious, but the more you can put away, the faster your retirement savings will grow — especially if you can start saving early and put compounding interest to work for you.
2. Leverage employer contributions — If your employer offers a 401(k) or 403(b) that features any form of matching funds, be sure to take advantage as soon as possible. These matching plans — which see employers match employee contributions to their retirement savings up to a certain dollar amount or percentage of the employee contribution — amount to free, tax-deferred funds in your retirement account.
3. Limit luxury spending — Everyone deserves to treat themselves to a hard-earned splurge on occasion. But by moderating your lifestyle and the amount of money you spend on non-vital purchases during your working years, you’ll have additional funds to devote to retirement savings. Further, living a less-lavish lifestyle while still employed can help prepare you for the sometimes-leaner living that often accompanies workers’ post-career years.
4. Automate your savings — By setting up recurring automatic transfers that move a set amount of funds to a retirement or savings account with each paycheck, you can gradually grow accustomed to living without the “missing” money. And by employing such an “out of sight, out of mind” tactic, especially over time, you can build your retirement savings substantially.
5. Work longer — By staying in the workforce longer, you can continue to build your retirement savings with continuing contributions. Plus, this will further allow your investments to grow before you need to begin making withdrawals, thus depleting your retirement-account funds. And of course, any added years of employment will reduce the number of years spent exhausting your saved funds, reducing the chances that you will run out of money when you’ve become elderly and unable to get back on the job.
6. Delay Social Security payments — Working longer also allows you to delay receiving your Social Security benefits, which will boost the size of your payments once you do start receiving them. U.S. workers are allowed to begin receiving their Social Security benefits at age 62, but for every year up to age 70 that they delay these payments, the dollar amount of their monthly benefit grows. Full details on the rate of increase of retirement benefits can be found on the Social Security Administration’s website.
7. Seek out passive income — Another way to realize a revenue stream during retirement is to leverage passive income opportunities such as those provided by owning dividend stocks or rental properties. For those who can afford to make such investments during their working years, the benefits can continue with added income that lasts into and even through retirement.