5 Ways to Save Thousands More for Retirement This Year (Start Today!)

5 Ways to Save Thousands More for Retirement This Year (Start Today!)

Socking Away More for the Future: How Americans Increased Their 401(k) Savings in 2023

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These days, financial news can feel like a rollercoaster ride. Inflation seems relentless, the stock market can be unpredictable, and some economic experts warn of a potential recession https://en.wikipedia.org/wiki/Recession. It’s enough to make anyone want to tighten their belts and focus on saving for the future. But according to a recent report by the Bank of America Retirement and Personal Wealth Solutions and the Bank of America Institute, there’s a positive trend emerging: Americans are actually saving more in their retirement accounts.

Intrigued? Let’s dive deeper and see how your nest egg stacks up against the national average.

Surprise! Americans Boost Their Retirement Savings

The report revealed a surprising fact: the average balance in a 401(k) account surged by a whopping 15% in 2023.

That’s a significant increase, especially considering the economic headwinds we’ve been facing. This positive trend extends to Health Savings Accounts (HSAs) as well, with balances growing by 11% during the same period.

So, how are Americans managing to squirrel away more money despite rising costs? Let’s break down the data and see what’s driving this growth.

Double Boost: Contributions and Market Performance

There are two main factors contributing to the rise in 401(k) balances. First, the report highlights an increase in contributions. Roughly 18% of survey participants reported putting more money into their 401(k)s in 2023. This is a great sign, indicating a growing awareness of the importance of retirement planning.

But there’s another force at play — the performance of the stock market. The S&P 500, a key benchmark for the U.S. stock market, enjoyed a strong year in 2023, surging by 24% https://www.investopedia.com/terms/s/sp500.asp. Many investors with 401(k)s allocated towards mutual funds or exchange-traded funds (ETFs) likely benefited from this bull run, leading to higher account balances.

HSAs on the Rise: Millennials Lead the Charge

The good news extends to Health Savings Accounts (HSAs) as well. These accounts offer a triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and qualified withdrawals for medical expenses are untaxed. In 2023, the average HSA balance climbed to $4,380, and a notable trend emerged — Millennials were the most aggressive savers in this category.

HSAs can be used for more than just emergency medical expenses. They also function as investment vehicles, allowing you to invest your funds in stocks or mutual funds for long-term growth. However, according to a survey by the Plan Sponsor Council of America, only 19% of HSA account holders took advantage of this investment opportunity in 2022. This means many people are missing out on potential tax benefits and additional returns their savings could earn.

Maximizing Your Savings and Investments in 2024

Whether your 401(k) or HSA balance falls below the national average or you simply want to get ahead, here are some strategies to consider for 2024:

• Take Advantage of Increased Contribution Limits: The good news keeps coming! The IRS has raised the contribution limits for both 401(k)s and HSAs. In 2024, you can contribute up to $23,000 to your 401(k) (an increase of $500 from 2023). HSA contribution limits have also been raised, with individuals able to contribute $4,150 this year (up 7.8% from last year). You can find the latest contribution limits on the IRS website https://www.irs.gov/. Even if you can’t max out your contributions, every dollar you save gets you closer to your retirement goals.
• Don’t Be Discouraged by Non-Contributors: According to a CNBC Your Money Survey, nearly 41% of workers don’t contribute anything to a retirement plan [https://www.cnbc.com/2023/04/11/cnbc-and-momentive-

Don’t Be Discouraged by Non-Contributors: According to a CNBC Your Money Survey, nearly 41% of workers don’t contribute anything to a retirement plan https://www.cnbc.com/2023/04/11/cnbc-and-momentive-release-results-of-cnbc-your-money-financial-confidence-survey.html. Even if you can’t afford to contribute the maximum allowed, remember that any amount you save is better than nothing. Start small and gradually increase your contributions as your budget allows.

• Invest for Growth: While saving is important, consider investing your retirement savings for long-term growth. Traditional savings accounts may not keep pace with inflation https://www.investopedia.com/terms/i/inflation.asp]. Look into options like mutual funds or low-cost index funds to potentially outpace inflation and build a more robust nest egg. Remember, both 401(k)s and HSAs offer tax advantages on capital gains under specific circumstances, making them ideal vehicles for long-term investing.

Additional Tips for a Secure Future

• Automate Your Savings: Set up automatic transfers from your checking account to your 401(k) and HSA. This is a “set it and forget it” approach that ensures you’re consistently saving without having to think about it every paycheck.
• Seek Guidance: Don’t be afraid to seek professional financial advice. A financial advisor can help you develop a personalized savings and investment strategy based on your individual circumstances and risk tolerance.
• Educate Yourself: There are countless resources available to help you learn more about investing and retirement planning. Take advantage of online resources, workshops, or seminars offered by your employer or financial institutions. The more you know, the more confident you’ll be in making sound financial decisions for your future.

Bonus Videos:

• The Psychology of Money: How to Think About WealthYouTube: [invalid URL removed] by Morgan Housel: This engaging video explores our relationship with money and dives into behavioral biases that can impact our financial decisions. It offers valuable insights for developing healthy money habits and building wealth over time.

• Investing for Beginners: The Simple Path to Building Wealth YouTube by The Motley Fool: This clear and concise video provides a foundational understanding of investing. It explains different asset classes, investment strategies, and how to get started with building a diversified portfolio for your long-term goals.

Remember, saving for retirement is a marathon, not a sprint. By adopting a consistent and disciplined approach, you can build a secure financial future and enjoy your golden years without worry. So, take control of your finances today and start taking steps towards a brighter tomorrow!