5 Time-Tested Tactics to Save for Retirement

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For the 70th-anniversary issue of Kiplinger’s Personal Finance, we distilled our best advice to show you how to build, protect and enhance your wealth throughout your life. Start with these tips to save more for retirement:

Take stock of where you stand. Estimate the future value of your current savings and see how much more you’ll need to save to hit your retirement goal. You could work with a financial adviser to make a plan, but in the meantime crunch the numbers with Kiplinger’s Retirement Savings Calculator. Our tool lets you factor in such variables as home equity and potential windfalls, such as an inheritance.

Write down a plan. Create a retirement budget, devoting one column to essential costs, such as housing and food, and another to discretionary expenses, including travel and hobbies. Factor in inflation for overall expenses, expected to be 2.4% over the next 20 years, according to the Congressional Budget Office. Consider making a separate calculation for health care costs, which are likely to have a much higher rate of inflation; HealthView Services, which analyzes health costs, projects a 5.1% inflation rate over the next 20 years. Match expenses to guaranteed income, including any pensions and Social Security payments, plus the annual amount you plan to draw from savings. If there’s a gap, reconcile yourself to spending less -- or working longer. Staying in the workforce for a few extra years gives you more time to contribute to your retirement accounts. Plus, you have fewer years to finance once you do retire.

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Supersize your contributions. If you’re 50 or older, you can make catch-up contributions to your IRA and 401(k). In 2017, you can add $6,000 to your 401(k) above the $18,000 annual contribution limit, for a total of $24,000 for the year. You can stash an extra $1,000 in a traditional or Roth IRA beyond the $5,500 annual contribution limit, for a total of $6,500 for the year. If you invest $24,000 in a 401(k) every year starting at age 50, you’ll boost your retirement savings by more than $580,000 by the time you’re 65, assuming your investments return 6% per year. If you invest $6,500 in your IRA during those years, you could amass more than $157,000 in your IRA in 15 years.

If you’re self-employed, you can also step up savings. In 2017, you can contribute up to 20% of your net self-employment income (business income minus half of your self-employment tax) to a SEP-IRA, up to a maximum of $54,000. In a solo 401(k) plan, you can put aside even more money because you can contribute as both an employer and an employee. In 2017, the maximum contribution is $54,000, or $60,000 if you’re 50 or older.