Resolution: increase your contributions to your retirement plan

Refraining from buying a couple of coffees or a few lunches a week will allow you to use that money to save for your retirement. When you stop paying for those little luxuries you will be able to contribute an additional $8 to $16 a week to your retirement plan. That extra money can make a big difference. Here is an example: Retirement plan income contribution example¹

Where will I find the money? After seeing the numbers in black and white, we’re sure you’ll agree that it is worthwhile to contribute more to your retirement plan. Maybe you’re asking yourself “where will I find the money to save”? Now is a good time to review your budget and look for places to trim. Cutting expenses is an effective way of having more money to increase the amount you contribute. In addition, you can deposit any salary raise you receive into your retirement account to boost your savings.

Another strategy is to participate in your employer’s retirement plan. Remember that your contributions are automatically deducted from your paycheck and transferred into the investment products you selected. Therefore, even if you never change your original contribution amount, you’re still saving money for retirement. But consider how much more you could potentially accrue if you periodically increase the amount you contribute. It’s as simple as changing the percentage of your pay that goes into your plan account.

You can also set aside an amount from your paycheck and transfer it to a different account, apart from your everyday savings—preferably to an account you can’t access that easily, thereby avoiding the temptation to spend it. In addition, you can start to pay off your credit cards. Once you have paid off one of them, save the money formerly used to make its monthly payments. Repeat the same strategy with other cards and watch your savings grow!

Start now “Why can’t I wait”? The sooner you start saving for your retirement, the sooner your savings will grow and compound more throughout the years. Increasing your contribution amount whenever possible may mean a larger account balance at retirement. Still not convinced? Remember that you’ll probably need to save more for retirement than for any other life goal, mainly because our life expectancy continues to increase and you’ll want to enjoy a quality life.

¹This is a hypothetical example used for illustrative purposes only. It assumes that amounts are invested monthly, an average annual total return of 6%, and monthly compounding. It does not represent the result of any particular investment. Your results will be different. Amounts are rounded off to the nearest dollar. Tax-deferred amounts accrued in the plan are taxable on withdrawal, unless they represent qualified Roth distributions. Source: DST Systems, Inc.

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The information and general descriptions contained in this article are designed to help you understand about the factors that you should generally consider when evaluating the appropriateness of any strategy or investment plan associated with your retirement plan. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; they are not intended to be regarded or construed as advice of any kind or a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting, or tax advice. Should legal, accounting, or tax advice be required, the services of a competent professional should be sought. Investment products that are available in a retirement plan are not insured by the FDIC, are not deposits or obligations of and are not guaranteed by Banco Popular de Puerto Rico or its subsidiaries or affiliates, and may lose value.