5 Ways to Boost Your Retirement Investing Strategy

For many people, saving for retirement starts after they land their first job with benefits. The sooner one starts thinking about building a nest egg, the better equipped they’ll be to manage and enjoy their retirement. However, the sheer quantity of financial vehicles and strategies can be intimidating for new or novice investors.

Fortunately, a few of the most common financial instruments and methods can help increase the value of your retirement investments. Here are a few that can have an impact on the not-too-distant future — and the distant one.

1. Ask Your Employer to Match 401(k) Contributions

For many employed Americans, saving for retirement is more or less automatic if their employer offers a 401(k) plan. If the employee is eligible and enrolls in the plan, they make regular contributions from their paycheck to the fund.

Employees in some companies have a chance to double monthly contributions through employer matching. In this structure, employers match these contributions to a certain limit, typically a percentage of the employee’s annual income. Essentially, it’s “free money” for your retirement.

If the employer doesn’t offer 401(k) contribution matching, it won’t hurt to ask. It could take a little more preparation, including knowing company policy, preparing a proposal, and gauging other employees’ interest. It’s not a bad idea to remind the employer of the tax benefits of matching your contributions.

2. Open an IRA

For many Americans who don’t have employer 401(k) plans, individual retirement accounts (IRA) are their main instruments for saving up for retirement. IRA holders contribute to these accounts, usually monthly, to establish funds they can use during their golden years. 

IRAs come in two types— traditional or Roth accounts. The main difference between the two is how they are taxed. 

With a traditional IRA, the investor makes tax-deductible contributions to their retirement fund. When it’s time to retire, the investor starts making distributions — i.e., taking withdrawals — from the account for regular income. These withdrawals are subject to tax.

A Roth IRA works in reverse. The investor makes contributions to their account after taxes, so their taxable income does not go down. But when they retire, they can make their withdrawals entirely tax-free.

Common investors opt for traditional IRAs because contributions are easier to manage. Those with limited savings or income may prefer them because of the tax-free contributions — they need a little more money now for current expenses. 

Wealthier investors may opt for Roth IRAs but may have to meet stringent income requirements to qualify for them. 

3. Invest in an Annuity

Annuities, offered via contracts with insurance companies, are similar in structure to retirement funds. You make regular contributions, wait until they mature, and then draw on the funds after you retire. As interest rates increase, the returns on annuities are becoming more attractive and investors are increasingly flocking to them, according to Ty J. Young of Ty J. Young Wealth Management.

However, unlike most retirement funds, there’s a built-in interest component with annuities, meaning you get interest payments on top of your regular retirement payouts.

Interest on an annuity is generally set with a fixed rate, meaning the annuity holder will get a consistent payout for the length of the annuity. There’s also the possibility of maximum gains to a certain percentage, though these rates are not guaranteed. 

One of the best things about annuities is that one can change their contracts if interest rates go up, and according to Young, that’s exactly what’s happening now. “If you have a CD that you bought two years ago at 1%, and now, you could buy a CD at 5%, you would want to move to the 5% if you could without losing money.”

4. Maximize Your Savings Approach

It’s always nice to get a little bit extra in spending cash. However, it’s a good idea not to spend it at all and, instead, put it toward your savings.

You may put aside a set percentage of your income for savings. When you get a raise, leave that percentage intact or potentially increase it. The temptation to buy products you couldn’t afford before may be great, but are they necessary? You may be better served by saving for the future.

5. Consider Delaying Social Security Benefits

This strategy comes into play as one nears the age of retirement. You can start drawing on Social Security benefits at age 62. But if you delay receiving these payouts for a few years, you’ll see bigger monthly payouts after you retire.

If you decide to wait until age 70, your benefits may be much higher than you expect. This is especially helpful if you still live with your spouse after retirement because they’ll realize the benefits, too.

Start Thinking Now

Whatever your situation, no matter how young you may be, the time to start planning for retirement is right now. Take time to study all the options you have for investing. A well-qualified financial professional can help you navigate all the possibilities.