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
  • Print the Boost your retirement savings by viewing our tip sheet
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, IRA product management, Bank of America Merrill Lynch.
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.
Saving early may help your results due to compounding interest

2. Contribute to your 401(k)

If your employer offers a traditional 401(k) plan, it allows you to contribute pre-tax money, which can be a significant advantage. Say you're in the 15% tax bracket and plan to contribute $100 per pay period. Since that money comes out of your paycheck before taxes are assessed, your take-home pay will drop by only $85. 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), 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 Learn about what to do with your 401(k).

3. Meet your employer's match

If your employer offers to match your 401(k) plan, 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: Learn about our 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 (see Learn about potential tax deductibility for any contributions you make to a Traditional IRA) and the investment earnings have the opportunity to grow tax-deferred until you make withdrawals during retirement. If you meet the income eligibility requirements, Learn about our Roth IRAs may be a good choice for you.Footnote 2 They are funded with after-tax contributions, so once you have turned age 59½, qualified withdrawals, including earnings, are federal-tax-free (and may be state-tax-free) if you've held the account for at least five years. To determine what type of IRA would work best for you, go to Use our selector tool 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? Once 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 over the age of 50.
Contribution Limits
Aim to increase your retirement contributions up to the maximum allowed in your 401(k), IRA or other retirement plans.
Contribution Limits
  Younger than Age 50* Age 50 and older
Traditional** or Roth IRAs
2017 Maximum Contributions***
$5,500 $6,500
2017 Employee Contributions
$18,000 $24,000
* You are treated as being age 50 or older if you will turn age 50 or older at any point during the calendar year.
** Contributions to Learn about our Traditional IRA accounts 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 2017, the MAGI ranges are: $62,000-$72,000 (single and head of household); and $99,000-$119,000 (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 $186,000 - $196,000.
Generally, married couples filing separately are not entitled to a deduction for contributions to Traditional IRAs. 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 $5,500 or $6,500, depending on whether you are age 50 or over.
*** You generally have until April 15 of each year to make your IRA contribution for the previous year. If April 15 falls on a weekend or a holiday, the deadline is typically the next business day. 401(k) contributions for 2017 can be made through 12/31/2017.

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 Edge® Make automated regular contributions to your IRA by using our Automated Funding Service allows you to automate regular contributions to your Merrill Edge® IRA from another account at Merrill Edge, Bank of America or other financial institution. You can also automate your investment selection with the Merrill Edge 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 Edge® has an online Determine where your money is going by using our budget worksheet and Determine where your money is going by using our 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.
Increasing your annual retirement contribution percentage can help make a difference

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 Merrill Edge® Find out if you're on track for retirement by using our 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, as the chart below shows. Pushing your retirement back even one year could significantly boost your Social Security income during retirement.Footnote 5
Annual social security benefit levels by retirement age
Source: Merrill Lynch Investment Management & Guidance calculations based on Social Security Administration calculator at socialsecurity.gov/OACT/quickcalc/ — accessed April 2016. Full Retirement Age is the age at which a person may first become entitled to full or unreduced retirement benefits. This chart applies to people born between 1943-1954 with a Full Retirement Age of 66. For those born later, the full retirement age is up to one year higher.
"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. According to one study, starting too late and saving too little topped retirees' list of regrets. Making the effort now will help make your retirement something to look forward to and help you View the article 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 both singles and heads of households. Please see Roth IRA Contribution Limits 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

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.