According to a recent survey, almost six in 10 workers (58%) reported a negative impact on their employment situation in 2020 such as a layoff, reduced hours, or a furlough. On top of that, another 23% say their spouse’s employment income suffered from these same actions.
An astounding 44% of Americans fear they will never be able to retire comfortably, according to a SimplyWise survey. As a consequence of pandemic-related financial strain, many workers were forced to reduce their retirement savings in 2020 or forgo savings altogether.
But with the new year comes renewed optimism. Many American’s are returning to work, easing their financial burden, and wondering how to get their retirement accounts and savings back on track. Read on for a guide to saving.
If you haven’t already been putting money away for your retirement, it’s time to start (especially if your bank account isn’t as full as you’d like it to be). Here are a few of the most impactful ways to meet your retirement goals and start saving again.
- Open a high-yield savings account.
- Automate your contributions
- Save from our paycheck
- Match 401(k) contributions
High-yield savings accounts offer a low-risk place to grow your money at a rate of return up to 10 times higher than the national average, which now sits at a paltry 0.05%.
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- You can earn higher interest rates than most savings accounts
- FDIC insurance protects your money up to $250,000.
- You can find accounts with no fees or minimum balance requirements
- You have easy access to your money.
- High-yield accounts may safeguard you from inflation
- You may not have access to brick-and-mortar banking institutions as most high-yield savings accounts are offered through online banks
- Lower yield than other investment options
- It may be subject to a specific number of monthly withdrawals
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A common goal of retirement is to have your investments fund the life you live today without requiring you to work. You can get there by practicing good savings habits, starting with automating your retirement contributions.
Determine how much money to earmark for savings: Ideally, you’ll aim to contribute at least 15% of your income to your retirement savings, including any matching funds from your employer. For example, if your earnings before all deductions are $2,000, earmark $300 for retirement savings.
If you’re currently unable to meet the 15% savings guideline, start by saving $25 a month and increase your savings over time.
The beauty of automatic contributions is that you remove the temptation to spend your money elsewhere.
One of the easiest ways to meet your savings goals is to set up a payroll deduction with your employer or arrange to send your money from your checking account sent directly to investment accounts or a high-yield savings account.
Redirect spending cuts to your savings account: A good budgeting app can help you analyze your spending and identify opportunities to save money. Once you determine where you’ll cut expenses, it’s advantageous to direct the newly-found money towards your savings account. If you leave the money in your checking account, it may be too tempting to spend the money on less important things.
For example, let’s say you free up $75 a month by canceling your gym membership. A good savings tactic is to set up an automatic recurring savings deposit for $75 on the same day your gym membership used to be deducted from your account.
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Currently, 73% of U.S. employers match at least some portion of their employees’ contributions to their 401(k) retirement plans. Make sure you’re contributing at least the maximum amount your employer will match to ensure you’re not leaving money on the table.
For example, if your company offers a dollar-for-dollar match up to 6% of your pay, and you contribute 6% of your pay to your retirement plan, you’ll end up with a total retirement contribution of 12% of your pay once the company match is factored in.
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If 2020 left its mark on your retirement funds, make 2021 the year you get back on track. Automating your savings makes it a breeze to work towards your retirement savings goals while maximizing your employer-match 401(k) contributions ensures you’re not missing an easy win for your savings.