3 Underrated Retirement Savings Tricks That Can Help You Save Thousands of Dollars

According to a report by the Employee Benefits Research Institute, nearly half of workers have less than $25,000 saved for retirement, and of those workers, more than a quarter have less than $1,000 in Reserve.

Whether you’re nearing retirement or your senior years are decades away, it’s important to set aside at least some money now to prepare. It might seem nearly impossible when money is tight, but these three underrated ways to save can make it a little easier.

Image source: Getty Images.

1. Take advantage of an HSA if you can

A health savings account (HSA) is essentially a retirement account designed just for healthcare expenses. You can contribute tax-deductible dollars to your HSA, let your money grow over time, and then withdraw your savings tax-free as long as the money is spent on eligible medical expenses.

Unlike flexible spending accounts, HSAs do not have a “use it or lose it” policy. This means you can invest in an HSA now and let that money sit for decades until you need it. Given that the average senior couple can expect to spend nearly $300,000 on healthcare expenses alone in retirement, according to a study by Fidelity Investments, the tax-free savings you’d get from an HSA can go very far.

The only caveat to an HSA is that you must be enrolled in a high-deductible health plan to contribute to it, which means you need a deductible of at least $1,400 for individuals. or $2,800 for families, plus an out-of-pocket maximum of $6,900 for individuals or $13,800 for families.

2. Claim the saver’s credit if you are eligible

The savings credit is a tax credit for contributions to your retirement account, such as a Traditional IRA, Roth IRAWhere 401(k). In other words, by simply saving for retirement, you can lower your tax bill.

To qualify for the credit, you must be at least 18 years old, you cannot be claimed as a dependent on someone else’s tax return, and you cannot be a student.

The maximum credit you can receive is 50% of your annual retirement account contributions (up to $2,000 for individuals and $4,000 for co-filers), and to earn the maximum amount, your gross income adjusted cannot exceed $19,500 per year for individuals or $39,000 per year. for married couples declaring jointly. If your income is higher than that, you may still qualify for a credit, but you may only receive a 20% or 10% credit. If your annual income exceeds $32,500 for individuals or $65,000 for married couples filing jointly, you are not eligible for a credit at all.

3. Increase your savings rate by just 1%

Retirement can be extremely expensive, but you don’t need to increase your savings by hundreds of dollars a month to save a significant amount.

In fact, saving just 1% more can potentially save you tens of thousands of dollars for your retirement. According to a study by Fidelity Investments, if you’re 35 and earning $60,000 a year, saving an additional 1% of your salary, or just $12 a week, can increase your total savings by nearly $85,500. $ at retirement. age.

Preparing for retirement can be tough, but it might not be as hard as you think to boost your savings. Every little bit counts, and the little steps you take now can add up to thousands of dollars in retirement savings.