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Luckily, there are a few strategies that can improve your savings rate. Committing to a realistic, attainable budget and tracking monthly expenses is a great way to ensure that you reserve a certain proportion of income for retirement. There are several great apps for tracking and visualizing expenses. Many people also find it helpful to dedicate a bank account to wealth creation, separating those funds from dollars in checking accounts that are utilized for regular expenses. If you can automatically deposit a fraction of income in a wealth creation account, that’s even better.
Finally, many people’s savings are hampered by higher monthly expenses from things like unnecessarily high debt. If you are paying high interest rates, you should consider opportunities to refinance or restructure debt. If you have an older mortgage, today’s low-rate environment might allow you to reduce monthly payments without incurring any additional debt. If you’re carrying high-interest credit card debt or personal loans, you might be able to eliminate that debt by accessing the equity in your home. Reducing interest payments can free up hundreds of dollars each month that can be redirected to savings and retirement investments.
Retirement account catch-up contributions
If you’re getting closer to retirement and hoping to make up for lost time, you can take advantage of catch-up contribution provisions for retirement accounts. People with 401(k), 403(b), or 457 plans who are over 50 years old can contribute an additional $6,500 annually. That’s $52,000 a year for a household with two income earners maxing out those limits.