If you want to enjoy a comfortable retirement without financial worries, you will need income outside Social Security. And this is where your personal savings come into play.
Of course, building a nest egg is no small feat – especially not these days, when inflation forces so many people to spend more on essentials like food and shelter. But if you want to grow your retirement savings in 2023, here are some essential tips to follow.
1. Claim your full 401(k) match
Many companies that offer 401(k) plans also match worker contributions to some degree. It’s important not only to understand what your match program looks like, but also to contribute enough funds to claim your match in full.
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If you don’t get your complete employer match, you will give up free money. But equally problematic is the fact that you will lose the opportunity to grow this employer contribution into a larger sum.
So let’s say you have the potential to get $3,000 employer match in your 401(k) in 2023. If you mark that payday and then invest it for 30 years at an annual return 8% average (which is a bit below the stock market average), you’ll turn it into just over $30,000. So all told, claiming even one employer match in a year could do a lot for your 401(k).
2. Know the rules for catch-up contributions
Once you reach age 50, you are allowed to make catch-up contributions to a 401(k) or IRA. Now, a myth you might hear is that these catch-ups are only for people who are behind on savings. Not so. You are eligible to make them once you reach age 50, regardless of your 401(k) or IRA balance.
Meanwhile, catch-up contributions for 401(k)s increase in 2023. Currently, they are set at $6,500. Next year they will increase to $7,500. However, today’s $1,000 IRA catch-up contribution limit will not increase in the new year.
3. Look beyond 401(k)s and IRAs
You may be lucky enough to be able to maximize your 401(k) or IRA. But that doesn’t mean you shouldn’t try to save more for retirement on top of that. And one plan that you can check out in this regard is an HSA (Health Savings Account).
Although CGSs are designed to help people cover healthcare costs, they are easy to use as a retirement savings tool. Health care will likely be a big expense once your career is over, so having money in an HSA could save you from having to use your 401(k) or IRA as often.
Plus, once you turn 65, you can make withdrawals from an HSA for any purpose without penalty — you don’t have to limit yourself to healthcare-related expenses. So all in all, funding an HSA is really a risk-free proposition because you will have the ability to use that money no matter what.
A big nest egg could be your ticket to your dream retirement. Follow these tips to make 2023 the year you make big savings progress.
The $18,984 Social Security premium that most retirees completely overlook
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