There could be a rationale for your consistent difficulty contributing to your retirement savings plan during the past few months.
For nearly a year, inflation has been steadily climbing. It’s not slowing down as quickly as we’d like, either.
The CPI increased by 0.5% in January over the previous month. When compared to the last month, that’s a big jump. Further inspection of the index reveals that prices for many necessities, most notably food items, continue to rise.
It’s no longer optional to put money away in a retirement account. But if you had to choose between that and paying the bills, you probably would prefer something other than the former.
Inflation will eventually cool off, giving you a window of opportunity to increase your contributions to your retirement plan. However, you might be worried that you can’t make the necessary contributions to your retirement account right now. Although inflation may reduce the amount you can save from each paycheck, there is a way to grow your savings.
Spending free retirement funds wisely is essential.
Because of the dramatic price increase, it may be impossible to contribute the maximum to a 401(k) plan in preparation for retirement. Even if your savings rate isn’t where it needs to be, you can compensate by contributing just enough to get the full 401(k) match.
Companies that provide 401(k) plans to pay employees a matching contribution. So even though it’s tough to boost your savings rate this year due to inflation, if you can scrounge up enough of a gift to claim your workplace match in full, your 401(k) will have a good chance of growing.
In addition, the money your employer puts into your 401(k) plan is yours to invest. So, say you get a $3,000 match this year and leave it in your 401(k) for the next 30 years. If your plan generates an annual average return of 8%, below the average return of the stock market, your initial investment of $3,000 will have grown to over $30,000. That is not a trivial sum of money.
Eventually, inflation should level out.
For those who are entirely fed up with inflation’s persistence as a significant issue, know that you are in good company. There will likely be a decrease in inflation rates in the future.
But until then, which may be several months away, it’s crucial to do whatever you can to keep putting money away for retirement in the meanwhile. Even if you cannot contribute as much to your 401(k) as you would like, you should make every effort to encourage your employer to do so.
The average Social Security benefit for retirees is $21,756 per year. However, the majority of seniors still need to claim this sum.
Many Americans need to catch up in saving for retirement. Still, there are a few “Social Security secrets” that the public isn’t aware of that might significantly increase your retirement savings. For instance, a simple strategy might increase your annual income by as much as $21,756. Once you figure out how to get the most out of Social Security, you’ll be ready to retire with the security we all strive for.