Rarely a week goes by when you don't see a headline declaring how underprepared Americans are for retirement. The numbers are grim: A 2016 GoBankingRates survey, for instance, found that one in three Americans has exactly $0 saved for retirement.
The reasons for that are pretty complex, but one thing is clear: We could all use a nudge when it comes to saving for our golden years. That's the thinking behind an Oregon pilot program, launched in July, which requires companies that don't offer a 401(k) plan to auto-enroll their workers in a state-run plan.
Known as OregonSaves, the idea is to withhold a percentage of employees’ paychecks automatically (the standard contribution is 5%) and put it into a Roth Individual Retirement Account (Roth IRA). Eight more states are creating similar programs, with California and Illinois planning to launch their own versions next year.
Though employees can choose to opt out, the idea is that auto-enrolling them will make it that much easier to save. But not everyone is in love with the idea. Small business owners are worried about absorbing the administrative costs, while some believe it may discourage companies from offering a 401(k) plan, reports the Wall Street Journal. Also, the fact that the White House recently shut down the federal myRA retirement savings plan due to lack of interest is being used as evidence by some critics that government-sponsored plans won't work.
Still, there's no denying that the easier it is to save, the more likely we'll all be to do it. And although the Oregon pilot consists of only 160 workers, it's seeing a 77% participation rate — higher than expected. By this fall, the state will expand the program to more companies.
So what are you doing to boost your retirement savings? Here are a few tips that can help you inch your contributions higher without feeling a pinch to your paycheck.
Boost contributions by just 1% annually. Chances are you'll barely miss such a small percentage of your paycheck, so scheduling a 1% increase to your retirement account every year can help you save more with a minimal impact to your take-home pay.
When you get a raise, increase your retirement contribution. If you get a 5% hike in pay, then raise the dollar amount that you contribute to retirement by 5%, and continue to live off your same budget. That way, your salary and what you save for retirement rise in tandem, without affecting your present lifestyle.
When you get extra income, set aside some of that for retirement. Score a nice bonus or have a steady paycheck from a side gig? Great — why not set aside some of that for retirement, too? Your nest egg will thank you later.