5 Ways to Build Retirement Savings During Uncertain Times

Over the last two years, American workers have endured the one-two punch of a pandemic-induced recession followed by a rapid increase in inflation. Both have widened the savings gap and increased concerns over financial security, especially when it comes to retirement savings.

According to a survey by Funding Our Future, more than a third of Americans with household incomes below $50,000 report they have less in savings than before the pandemic, and more than half of all Americans are anxious about their current financial situation. Not surprisingly, many workers are turning to their employers for assistance, with 87% saying it is very or somewhat important that their employer offers retirement benefits.

The good news is there are many ways for the average American to help their retirement accounts thrive even during uncertain times. Here are five expert tips to supercharge your retirement savings plan.

Make Sure You Are Getting the Full Employer Match

Many companies offer to match contributions to your retirement account up to a certain percentage, in addition to your regular salary. If this is news to you, make sure you talk to your employer to see if they offer a match.

Maggie Klokkenga, a Certified Financial Planner, advises all employees to take advantage of this match. “This is free money to you, so make sure that you are at least contributing enough to receive the match.” In terms of return-on-investment, a dollar-for-dollar match equals a 100% return. For perspective, it is unheard of to find any opportunity that would double your investment without taking on extreme risk. 

The particulars of the match differ by the employer; some may offer a 100% match of the first 4% of your paycheck that you contribute, others may match 50% on the first 6% of your pay. However, the idea is the same. It provides a great incentive to contribute to your retirement account and can be one of the easiest ways to boost your savings rate.

Optimize Your Asset Allocation

How much of your money should you have invested in stocks, bonds, and cash? Some investors take a set-it-and-forget-it approach to asset allocation, which can be detrimental to your long-term goals. Early in your career, it may make sense to take on more risk in anticipation of greater long-term returns. As you grow older, most experts advise a more conservative mix of investments to ensure steady passive income in retirement. Many employer retirement plans offer free consultations with a financial advisor or online tools to help you dial in your strategy and rebalance your portfolio.

Financial Coach Kelley Long recommends maximizing the benefits of the tools offered by your retirement plan. “One of the biggest mistakes I see younger workers make is that they invest too conservatively, but they don’t know that until they meet with a financial coach or use a tool in their retirement plan that offers tips on how to best invest based on their age and desired retirement age.”

Take Advantage of Automatic Contribution Increases

Another feature of retirement accounts that many people are unaware of is setting up an automatic escalation of your contribution amount. “If you signed up years ago and have not increased your contributions, see if you can bump them up a few percentage points. Very often, people get increases in pay but forget to increase their retirement plan contributions,” recommends Stephanie McCullough of Sofia Financial.

With an automatic escalation option, you can easily increase your contributions each year without giving it a second thought. If you time it to coincide with your annual pay raise, you can add, for example, an additional 1% to your retirement savings each year without feeling the pinch of a lower paycheck.

Utilize Your HSA for Tax-Free Growth

If you have a high-deductible healthcare plan through your employer, your Health Savings Account (HSA) is a commonly missed opportunity to fund future expenses, says Blaine Thiederman, a financial planner at Progress Wealth Management.

While you would typically use an HSA for current medical expenses, Thiederman recommends not touching your balance unless absolutely necessary but instead paying with your bank account. “[HSA accounts] are loved by financial planners everywhere,” he says. Thiederman explains that HSAs represent a trifecta of tax benefits: tax-free contributions, tax-free growth, and tax-free withdrawals as long as you use them for qualified medical expenses.

If you are worried about not being able to use your HSA balance in the future, consider the amount of money you could spend in retirement on medical expenses alone. With the average retired couple needing $300,000 or more saved to cover health care expenses in retirement, it can make sense to grow a nest egg dedicated toward medical costs.

No Employer Plan? Use an IRA Instead

Even if your employer doesn’t offer a retirement plan, there are still options to invest in other tax-advantaged accounts, such as Individual Retirement Accounts (IRAs). “If your employer does not offer a retirement plan, do not panic,” says Klokkenga. “You can open a traditional IRA, where you may receive a tax deduction for your contribution, or you can contribute to a Roth IRA, where the distribution is not taxed because you are making contributions with already-taxed dollars.”

While annual contribution limits for IRAs are lower than employer-sponsored 401(k) plans, you can still contribute $6,000 per year as of 2022, or $7,000 if you are age 50 or older.