If you’re falling behind on your retirement savings, take heart — you’re not alone. The average American’s retirement savings is 32% lower than it should be when measured against their salary, according to a study last year by DollarGeek. The study also found that all age groups are behind in their retirement savings.
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The good news is, there are several strategies you can use to bolster your retirement funds so you’re in a solid financial position when you retire. Here’s a look at five clever ways to speed up your retirement savings.
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One of the best and safest ways to grow your retirement savings is through an annuity.
An annuity is an insurance product that pays out a fixed amount of money in a series of payments. Some annuities provide a steady source of income for as long as you live. The main function of an annuity is to remove longevity risk for retirees, meaning they don’t have to worry about outliving their savings.
Annuities are divided into two phases — the accumulation phase, when you make contributions to the account and your funds grow, and the annuitization phase, when you start receiving payments.
There are a couple of reasons to invest in annuities. First, your money is in a safe place that provides steady returns over a long period of time. And second, the money grows through the interest you earn, so it pays to find the best rates. Plus, the savings are tax-deferred, which means you don’t pay any income taxes on the annuity until you start to withdraw funds.
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When you get a pay raise or bonus at your job, consider it free money you can put away without having to think about it.
If you’ve been able to live within your means before you got the raise or bonus, you should be able to keep living without it in the future. Putting extra money from raises and bonuses into retirement savings can boost your balance in a hurry without your monthly budget taking a hit.
Some individual stocks shoot up in value and make investors a lot of money, but finding the right one is a challenge, even for experienced investors. You never know when some unforeseen event will send the stock tumbling.
Rather than betting a large percentage of your retirement savings on a single stock, spread your money around into different types of assets, such as savings accounts, funds, bonds, retirement plans and annuities. Investing in an annuity helps you avoid the risk and volatility associated with stocks and even mutual funds.
