10 tips to help you boost your retirement savings – whatever your age

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Whether you just started working or you're nearly done, you can still potentially grow your nest egg.

Key points

  • It's never too early — or too late — to start saving for retirement
  • If you are just starting out, focus on saving as much as you can now
  • If you are nearing retirement, consider increasing contributions to your savings or delaying Social Security
When planning for retirement, the truth is that the earlier you start saving and investing, the better off you'll be, thanks to the power of compound interest. And even if you began saving late or have yet to begin, it's important to know that you are not alone, and there are steps you can take to increase your retirement savings. "It's never too late to get started," says Debra Greenberg, Director, Retirement and Personal Wealth Solutions, Bank of America.
Consider the following tips, which can help you boost your savings — no matter what your current stage of life — and pursue the retirement you envision.

1. Focus on starting today

Especially if you're just beginning to put money away for retirement, start saving and investing as much as you can now, and let compound interest — the ability of your assets to generate earnings, which are reinvested to generate their own earnings — have an opportunity to work in your favor. "The more you can invest when you're young, the better off you'll be," Greenberg says.
Starting early may help results, even investing a small amount
By starting to put away money earlier, a 25-year-old investing $75 per month accumulates more assets by age 65 than if he or she had started to invest $100 per month at age 35 — despite investing less each period. Investing a smaller dollar amount over a long time horizon can have a greater impact on investment results than investing a larger dollar amount for a shorter period of time.
Bar chart displaying examples of asset value that could be earned by a 25 year old giving $75 per month and a 35 year old giving $100 per month, by age 65. A 25 year old giving $75 per month may generate $88,943 at a 4% rate of return, $150,109 at a 6% rate of return, or $263,571 at an 8% rate of return by age 65. A 35 year old giving $100 per month may generate $69,636 at a 4% rate of return, $100,954 at a 6% rate of return, or $150,030 at an 8% rate of return by age 65.
Source: ChartSource®, DST Systems, Inc. This example is hypothetical and does not represent the performance of a particular investment. Your results will vary. Actual investing includes fees and other expenses that may result in lower returns than this hypothetical example. © 2019, DST Systems, Inc. All rights reserved. Not responsible for any errors or omissions.

2. Contribute to your 401(k)

If your employer offers a traditional 401(k) plan and you are eligible, it allows you to contribute pre-tax money, which can be a significant advantage. Say you're in the 12% tax bracket and plan to contribute $100 per pay period. Since that money comes out of your paycheck before federal income taxes are assessed, your take-home pay will drop by only $88 (plus the amount of applicable state and local income tax and Social Security and Medicare tax). That means you can invest more of your income without feeling it as much in your monthly budget.Footnote 1 If your employer offers a Roth 401(k) feature, which uses income after taxes rather than pre-tax funds, you should consider what your income tax bracket will be in retirement to help you decide whether this is the right choice for you. Even if you leave that employer, you have choices on what to do with your 401(k) account.

3. Meet your employer's match

If your employer offers to match your 401(k) plan contributions, make sure you contribute at least enough to take full advantage of the match, Greenberg says. For example, an employer may offer to match 50% of employee contributions up to 5% of your salary. That means if you earn $50,000 a year and contribute $2,500 to your retirement plan, your employer would kick in another $1,250. It's essentially free money. Don't leave it on the table.

4. Open an IRA

Consider establishing an individual retirement account (IRA) to help build your nest egg. You have two options: a Traditional IRA may be right for you depending on your income and whether you and/or your spouse have a workplace retirement plan. Contributions to a Traditional IRA may be tax-deductible and the investment earnings have the opportunity to grow tax-deferred until you make withdrawals during retirement. If you meet the phased out income limits, which are based on your federal tax filing status, a Roth IRA may be a good choice for you.Footnote 2 They are funded with after-tax contributions, so once you have turned age 59½, qualified distributions, including earnings, are federal-tax-free (and may be state-tax-free) if certain holding period requirements are satisfied. To determine what type of IRA would work best for you, go to Find out which IRA may be right for you and also check the Contribution Limits chart, below.

5. Take advantage of catch-up contributions if you are age 50 or older

One of the reasons it's important to start saving early if you can is that yearly contributions to IRAs and 401(k) plans are limited. The good news? As of the calendar year you reach age 50, you're eligible to go beyond the normal limits with catch-up contributions to IRAs and 401(k)s.Footnote 3 So if over the years, you haven't been able to save as much as you would have liked, catch-up contributions can help boost your retirement savings. Take a look at the chart, below, for contribution limits for individuals turning age 50 or over in 2019 or 2020.
Traditional* and Roth IRA** 2020 2019
Contribution limit
if you are below age 50 and will not turn 50 during the year
$6,000 $6,000
Catch-up contribution limit
if you are age 50 or older***
$1,000 $1,000
Total contribution limit if you are age 50 or older*** $7,000 $7,000
Contribution deadline**** 4/15/21 4/15/20
401(k) 2020 2019
Contribution limit
if you are below age 50 and will not turn 50 during the year
$19,500 $19,000
Catch-up contribution limit
if you are age 50 or older***
$6,500 $6,000
Total contribution limit if you are age 50 or older*** $26,000 $25,000
Contribution deadline**** 12/31/20 12/31/19
* Contributions to Traditional IRAs may be tax deductible. If you participate in an employer-sponsored retirement plan, the tax laws limit the deductibility of your contributions based on modified adjusted gross income (MAGI) ranges that are published annually and correspond to your federal tax filing status — if your MAGI is less than the lower limit, you are eligible for a full deduction for your contributions; if your MAGI is between the limits, you are eligible for a partial deduction; and if your MAGI is above the upper limit you are not eligible for a deduction. For the 2019 tax year, IRA owners cannot make a contribution if they are age 70½ or older on December 31, 2019, including contributions made during 2020 (before the tax filing deadline) with respect to the 2019 tax year. For tax years beginning after December 31, 2019, anyone with earned income can make a contribution to an IRA, regardless of their age. Note that a spouse can also contribute on behalf of a spouse who has no earned income, provided the contributing spouse has enough earned income to cover the contributions. The Traditional IRA MAGI ranges are: $65,000-$75,000 in 2020 and $64,000-$74,000 in 2019 (single and head of household); and $104,000-$124,000 in 2020 and $103,000-$123,000 in 2019 (married filing jointly and qualified widow(er)). If you do not participate in an employer-sponsored retirement plan but your spouse does and your filing status is married filing jointly, the deductibility of your contributions is determined based on the MAGI range of $196,000-$206,000 in 2020 and $193,000-$203,000 in 2019.
Generally, if you are married filing separately, you are not entitled to a deduction for contributions to a Traditional IRA if your MAGI is $10,000 or more and you or your spouse participate in an employer-sponsored retirement plan. However, if you are married and file separately but do not live with your spouse at any time during the year, your maximum deduction is determined as if you were a single filer.
If neither you nor your spouse is covered by an employer retirement plan, the maximum deduction is either $6,000 or $7,000, depending on whether you are age 50 or older at any time during the year to which the contributions relate.
** Whether you are eligible to contribute to a Roth IRA is based on your MAGI. The tax laws limit the eligibility to contribute to a Roth IRA based on MAGI ranges that are published annually and correspond to your federal tax filing status — if your MAGI is less than the lower limit, you are eligible to contribute up to the annual contribution limit for the year; if your MAGI is between the limits, you are eligible to make a partial Roth IRA contribution; and if your MAGI is above the upper limit you are not eligible to contribute to a Roth IRA. The Roth IRA MAGI ranges are: $124,000-$139,000 in 2020 and $122,000-$137,000 in 2019 (single and head of household); and $196,000-$206,000 in 2020 and $193,000-$203,000 in 2019 (married filing jointly and qualified widow(er)).
Generally, if you are married filing separately, you are not entitled to contribute to a Roth IRA if your MAGI is $10,000 or more. However, if you are married and file separately but do not live with your spouse at any time during the year, your maximum deduction is determined as if you were a single filer.
*** You are treated as being age 50 or older if you will turn age 50 or older at any point during the calendar year to which the contributions relate.
**** You generally have until April 15th of each year to make IRA contributions for the previous year to which the contributions relate. If April 15th falls on a weekend or a holiday, the deadline is typically the next business day.

6. Automate your savings

You've probably heard the phrase "pay yourself first." Make your retirement contributions automatic each month and you'll have the opportunity to potentially grow your nest egg without having to think about it, Greenberg says. The Merrill Automated Funding Service allows you to automate regular contributions to your Merrill IRA from another account at Merrill, Bank of America or other financial institution. You can also automate your investment selection with the Merrill Automatic Investment Plan, which invests assets automatically in specific funds.Footnote 4

7. Rein in spending

Examine your budget. You might negotiate a lower rate on your car insurance or save by bringing your lunch to work instead of buying it. Merrill has a cash flow calculator that can help you determine where your money is going — and find places to reduce spending so you have more to save or invest.
Your contribution rate: a little extra can help make a big difference
How much you contribute to your retirement plan today can make a big difference in how much you have when you're ready to retire. Just increasing your contribution rate from 4% to 6% could add over $101,000 to your nest egg over 30 years, assuming a $50,000 salary.
Bar chart illustrating how much a 4%, 5% and 6% contribution of a $50,000 annual salary over 30 years could contribute to a retirement nest egg. 4% of a $50,000 annual salary could amount to $203,419 in 30 years. 5% of a $50,000 annual salary could amount to $254,265 in 30 years. 6% of a $50,000 annual salary could amount to $305,123 in 30 years.
Source: Bankrate, 401k Retirement Calculator. This example is hypothetical and does not represent the performance of a particular investment. Your results will vary. Actual investing includes fees and other expenses that may result in lower returns than this hypothetical example.

8. Set a goal

Knowing how much you'll need not only makes the process of saving and investing easier but also can make it more rewarding. Set benchmarks along the way, and gain satisfaction as you pursue your retirement goal. Use the Personal Retirement Calculator to help determine at what age you may be able to retire and how much you may need to invest and save to do so.

9. Stash extra funds

Extra money? Don't just spend it. Every time you receive a raise, increase your contribution percentage. Dedicate at least half of the new money to your retirement plan. And while it may be tempting to take that tax refund or salary bonus and splurge on a new designer purse or a vacation, "don't treat those extra funds as found money," Greenberg says. She advises that you treat yourself to something small and use the rest to help make big leaps toward your retirement goal.

10. Consider delaying Social Security as you get closer to retirement

"This is a big one," Greenberg says. "For every year you can delay receiving a Social Security payment before you reach age 70, you can increase the amount you receive in the future." Age 62 is the earliest you can begin receiving Social Security retirement benefits, but for each year you wait (until age 70), your monthly benefit will increase, and the additional income adds up quickly. Pushing your retirement back even one year could make a significant difference.Footnote 5 It can also increase potential future survivor benefits for your spouse.
"Recognizing the need to put money away for retirement is the first step," Greenberg says. Understand how much you want to sock away for retirement, and find creative ways to increase your contributions. Starting too late and saving too little is a common regret amongst retirees. Making the effort now will help make your retirement something to look forward to and help you stop worrying about retirement.
Next steps

Footnote 1 Income tax will be due upon withdrawal and you may be subject to a 10% additional federal tax for withdrawals prior to age 59½.

Footnote 2 Contributions to Roth IRAs begin to phase out at different income ranges for married taxpayers filing jointly, married taxpayers filing separately and singles or heads of households. Please see Roth IRA Contribution Limits above for specific income amounts.

Footnote 3 http://www.irs.gov/Retirement-Plans/COLA-Increases-for-Dollar-Limitations-on-Benefits-and-Contributions

Footnote 4 Please keep in mind that an automatic investment plan does not ensure a profit or protect against loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating price levels; Investors should carefully consider their financial ability to continue their purchases through periods of fluctuating price levels.

Footnote 5 http://www.ssa.gov/retire2/delayret.htm

Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
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