Savings

2 easy ways to boost your retirement savings before the end of the year

Now that we are nearing the end of 2022, many people are starting to take stock of their finances. That means evaluating emergency funds, looking at brokerage accounts, and seeing how well they’re doing with pension plan contributions.

If you’re not particularly happy with your retirement savings rate this year, you may have run into a problem when you paused your IRA or 401(k) plan contributions for a period of time to meet the rising cost of living. Inflation has forced many people to make such difficult choices this year.

But if you look at your IRA or 401(k) balance and you’re not happy with it, know that all is not lost. You still have the opportunity to inject more money into your savings before the end of 2022 – and take advantage of the tax savings that come with it. (Remember that contributions to a traditional retirement plan reduce your taxable income for the year.) Here’s how to boost your savings next month without breaking a sweat.

Image source: Getty Images.

1. Get your full 401(k) match

If you have access to a 401(k) plan through your employer, chances are you are also eligible for some type of match. Granted, not all companies do this, but many do. And if you haven’t yet contributed enough to claim your full consideration, pushing yourself to ramp up in December could mean boosting your savings. a lot under snag that free money.

Let’s say your business will match up to $5,000 in annual 401(k) dollar-for-dollar contributions. If you’ve only contributed $4,000 so far, but are able to contribute $1,000 more to your 401(k) next month, you’ll receive $2,000 of that contribution.

That said, if you want to increase your savings rate in your 401(k) plan, make that request quickly. It may take your payroll department a little while to process this change, and you don’t want to miss any days in 2022.

2. Save your year-end bonus

Many companies have a habit of giving end-of-year bonuses. If you qualify, it is best to ask your payroll department if it is possible to allocate this money to your 401(k).

Will that mean missing the opportunity to spend that money on something fun? Yes. But the beauty of a bonus is that it’s extra money, not money you rely on to pay the bills. If you’re willing to put your bonus into your 401(k), you can really increase your savings.

Don’t have a 401(k)? Simply cash that bonus check, then transfer the equivalent amount into your IRA.

In fact, with an IRA, you have plenty of time to do this because you have until next year’s tax filing deadline to finish funding your IRA for 2022. So even if you don’t receive that bonus check until December 31, it won’t be too late to put that money into your IRA.

The more you’re able to increase your retirement savings over the next month, the more financially secure you’ll feel heading into 2023. These easy steps could be your ticket to a higher savings balance — and also , more short-term tax savings and financial stability down the line.

The $18,984 Social Security premium that most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a few little-known “Social Security secrets” could help boost your retirement income. For example: an easy trick could earn you up to $18,984 more…every year! Once you learn how to maximize your Social Security benefits, we believe you can retire confidently with the peace of mind we all seek. Just click here to find out how to learn more about these strategies.

The Motley Fool has a disclosure policy.