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4 Ways to Save More for Retirement

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Although around 60% of American workers feel somewhat confident they will have enough money to retire in comfort, this confidence may be misplaced, as almost half of all American households have less than $25,000 in total savings and investments. 

By the time you've reached the age of 30, you should have at least the equivalent of your annual salary saved -- and preferably you'll have most of that invested for retirement.

If building a big nest egg seems daunting, don't worry -- you can increase your retirement contributions over time. Plus, there are ways to painlessly boost the amount of money you're saving for your golden years. Here are five big ways you can save more for retirement -- without dramatically changing your lifestyle or giving up the things you enjoy.

1. Take advantage of tax breaks and free money

The single best way to put aside extra cash for retirement is to accept a little help from your employer and Uncle Sam. If you invest through a 401(k), you'll likely get matching contributions from your employer, and you'll also enjoy some highly valuable tax breaks on your investments.

In 2017, the maximum annual contribution to a 401(k) is $18,000 if you're under age 50 or $24,000 if you're aged 50 or older. The money you contribute to a traditional 401(k) is taken out of your wages pre-tax. So, for example, a worker who earns $55,000 per year could reduce their taxable income to $37,000 by making the maximum 401(k) contribution ($55,000-$18,000). Their income puts them in the 25% tax bracket, thus their 401(k) deferral would reduce their taxes for the year by $4,500 ($18,000 x 0.25).

If your employer matches your contributions, then that's an offer you can't refuse. The most common employer match is a dollar-for-dollar match on the first 6% of income. So if you make $55,000, the 6% match is worth $3,300 in free money from your employer, as long as you contribute at least that amount. If you invest the maximum of $18,000 and take advantage of both a $3,300 match and $4,500 in tax savings, you'll reduce your take-home income by about $13,500 annually, but you'll end up with $21,300 in retirement savings deposited into your 401(k).

If you don't have access to a 401(k) or similar employer-sponsored account, then consider opening an individual retirement account, which offers the same tax advantages, though the contribution limits are lower -- $5,500 for savers under age 50 and $6,500 for those aged 50 and up, as of 2017.

Since tax breaks give your savings a big boost, contributing as much as possible to tax-advantaged retirement accounts is the best investment you can make. 

2. Automate your retirement investments

When companies automatically enroll their employees in a 401(k), studies show that close to 100% of workers make contributions. When employees have to go out of their way to opt into the 401(k), participation rates plummet to 40%. 

The fact of the matter is that most people take the path of least resistance. However, you can use this inertia to your advantage by having a set amount of money automatically diverted to your retirement savings account on a regular basis. If you're investing through a 401(k), your friendly finance rep can have a portion of each paycheck sent to your 401(k) before the money is ever in your hands. In the case of an IRA, your bank can automatically transfer funds from your checking or savings into your retirement account, perhaps once or twice a month.

If you put your savings on autopilot, it's unlikely that you'll skip a month or stop making those contributions, as that would take effort and paperwork. You can also set up an automatic deduction to send money to your IRA, either instead of or in addition to a 401(k) contribution. You won't miss the money, and you won't have to force yourself to do the responsible thing every single month.

3. Allocate some or all of your raises to retirement

Lifestyle inflation is a big problem. When people make more money, they tend to spend more money, quickly eating up all the extra cash they're earning. We adjust to a higher income so quickly that a pay raise tends not to make us much happier in the long run. And if you don't set aside some of your raise for the future, it also won't end up helping you achieve financial security.

To make sure lifestyle inflation doesn't absorb your raise, take action as soon as you get an pay bump. Adjust your automatic contributions to your 401(k), IRA, or both so that some -- or, better yet, all -- of the extra income is invested for your future. Your raise will have an outsize effect on your future happiness -- and it may even help you retire earlier.

4. Pick up extra income with a side gig

You can only cut your spending so much, and you can only set up automatic withdrawals based on the income you have available to you -- so if you really want to boost your retirement savings, increasing your income may be the best way to do it. If you could earn an extra $50 per week by taking on a side gig like driving for a ride-sharing company or doing some freelance work, you could contribute about $200 a month to an IRA. This $200 monthly contribution, made from age 30 to age 65, would turn into about $355,000, assuming you invested in stocks and earned the market's long-term average return of 7%. That would go a long way toward buying you years of financial security. 

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