The New Year is right around the corner but I bet many of you haven’t implemented this simple step to set yourself up for a more likely financially successful retirement.
It involves your retirement contribution rate and the average retirement contribution rate for US employees is so scary I didn’t even bother looking it up.
If you want to have a financially successful retirement you must want to (and actually) be above average. It isn’t too hard and I’m certain you can do it. So what is this simple tip?
Increase Your Retirement Contributions
Increasing your retirement contributions is quite easy in most cases. The first thing you need to do is know how much you are currently contributing to your retirement account. Look at your brokerage statements or paychecks depending on how you contribute. If you need help figuring this out contact me and I’ll do my best to assist you.
The next step is quite easy now that you know how much you currently contribute. Contribute more money! If you contribute through paycheck deductions go to your HR department (or log in to your account online) and ask to increase the amount or percentage beginning in January.
Even a small additional amount as low as 1% a year or $10 a paycheck can make a big difference in your retirement.
If you execute transactions through your brokerage firm, simply increase the amount of each transaction you execute by your additional contribution. If you have an automatic investment plan set up with your brokerage firm, increase the amount of the automatic contributions.
You should only have to increase this once per year and then you can forget about it until next year when it is time to increase your contributions again!
Can Raising Your Retirement Contribution Amount Make a Difference?
Think about this. If you get paid bi-weekly (26 times a year) and increase your retirement contributions by just $10 a paycheck once and maintain that contribution level you’ll be contributing an extra $260 per year. If you have 40 years until retirement that is an extra $10,400 even without calculating any type of investment returns!
Another fun example is if you increase you retirement contributions by $10 additional dollars each year. That would be $10 per paycheck over the base year in year one, $20 per paycheck over the base year in year 2 etc… By the end of year 40 you will have contributed an additional $213,200 just in base contributions. That doesn’t even factor in investment returns!
You have a few options of which retirement savings to increase depending on your personal situation. Americans could increase the amount you contribute to your Roth IRA, regular IRA, 401(k), 403(b) or other tax advantaged retirement savings vehicle (as long as you don’t exceed the stated 2013 maximum contribution limit next year). Here is a great resource if you don’t understand an IRA vs 401(k).
If you’ve taken advantage of all of the tax advantaged accounts that you can, or you want to retire early and needs some non-retirement savings, you can contribute more to a taxable brokerage account.
This simple strategy is so easy. It only requires you to increase your contributions. We aren’t talking about huge difference. Just increase your contributions. You’ll thank me when you retire and have more money to live your life.
Do you increase your retirement contributions every year? Will you be doing so for 2013?
An accountant by day and blogger by night, Lance is the owner of this site. 
We absolutely increase our contributions each year. One of the easiest ways to do so is built into our 401K provider’s site (Fidelity). They have an automatic increase that you can set. Basically you can set it so every January 1, your 401K contributions increase by 1%, 2% or more. No need to remember to do it manually.
Mrs. Pop @ Planting Our Pennies recently posted..Why We Love Public Records
My employer won’t let me do it with a Roth 401(k) so I have to manually increase it every year.
I maxed out my 403 B contribution again! I also increased my IRA and Roth IRA contribution too.
krantcents recently posted..Happy Holidays
That’s awesome! Keep maxing more stuff out!
Practical and awesome advice. It’s so simple it hurts!
It really is super easy, and can have amazing long-term benefits! And don’t forget the tax benefits as well
Jacob @ iheartbudgets recently posted..iPad 3 Giveaway!
Now or later, you’ll eventually get those tax benefits
We decided to increase our Roth IRA contributions by $20/month, like you suggested! It’s basically just keeping up what we were paying before, percentage-wise, after our yearly cost-of-living raises. It’s small but I’m glad we did something.
Emily @ evolvingPF recently posted..Reader Request: Credit Scores and Credit Reports
Anything is better than nothing (or less!) by far!
For SURE I will be increasing the 401k and Roth IRA contributions this year! There’s just not a good reason not to.
My Money Design recently posted..My Stocks with High Dividends Income Report – December 2012
I max out my Roth IRA every year, but now that the limit is going up $500 I’ll increase that and offset it with my Roth 401(k).
We usually get a raise in January so that is always a good time to consider it!
Holly@ClubThrifty recently posted..Snowed In…and Succumbing to Lifestyle Inflation
We’ll be increasing my wife’s retirement contributions when she gets her raise in February. We’re not sure how much the raise will be but we’ll definitely increase her Roth 401k contributions by at least 1%.
Jason recently posted..Harley Davidson® Visa Credit Card Review
A very small thing that can make a very big difference.
funancials recently posted..Where Will You Be When The Bond Bubble Bursts?
So true
Glad you agree