Saving for retirement doesn’t happen in one fell swoop. It usually starts with baby steps: First you have to enroll in a 401(k) or set up an IRA. Next it's time to take advantage of any employer match available to you. And then you should be vigilant about increasing your contributions periodically.
If you’ve already taken some of these steps, congratulations—you’re ahead of the curve! According to a recent Bankrate survey, nearly 40% of Americans haven’t even started saving for retirement. And the numbers don’t get much more encouraging with age: More than a quarter of those ages 50 to 64 admit to the fact that they don’t have a nest egg.
But starting to save is just half the battle—there are other steps you should consider taking in order to maximize your retirement strategy and help make every penny set aside count.
That's why we've rounded up six small, retirement-focused moves you can do today—including ones you can do right in your LearnVest.com account—that could help boost your nest egg savings down the line. Translation: Not only can these ideas help you save more, but they can also help you save smarter.
Small Move #1: Seek Out Low Expense Ratios
An expense ratio is a fancy name for the fee you pay when you invest in a mutual fund or ETF. It’s essentially the percentage of assets that a fund charges to cover its administrative and management costs.
And the more "actively" your account is managed—i.e., there is a person or team who is making trades to potentially boost your return—the higher that percentage tends to be. If your account is "passively" managed, that means it’s likely mirroring an index, like the S&P 500, and it doesn’t usually require active trading. Therefore, your fee will likely be lower.
RELATED: Are Your Mutual Fund Fees Too High?
Expense ratios are seemingly small—they typically range anywhere from less than 1% to 2%—but they can have a considerable impact on your investments in the long run.
Say you’ve invested $10,000 in a fund that has a 6% annual return and an expense ratio of 1.5%. In 25 years, that fee has cost you $13,339 in returns. By contrast, if that account had an expense ratio of 0.5% instead, that number goes down to $5,031. (Check out this Vanguard graphic for more on how expense ratios could affect your returns.)
The bottom line: "[Your expense ratio] should be below 1%. If it's above that, consider looking at competitors to find a better deal," says David Blaylock, CFP® with LearnVest Planning Services. “There are probably lower-cost alternatives that achieve the same investment objectives.”
If you’re not sure what your expense ratio is, call your provider to double check or read through your prospectus, which should have the details. Many companies make it hard to find, but legally, they must share their fee information.
And if you have a 401(k), switching providers may be harder because you’re limited to who your company uses. But you can at least talk to your human resources department about the possibility of finding one that offers lower-fee funds.
Small Move #2: Look Into Auto-Escalating Your Retirement Savings
Many experienced savers already take a “path of least resistance” approach to their retirement contributions by having a set percentage of their salary deducted from their paychecks and diverted to a 401(k).
This type of automation helps keep you from spending your retirement money, but it still leaves the job of increasing your savings up to you—a task that often falls to the priority wayside.
Luckily, "plans are beginning to add an auto-escalation feature, which can even coincide with your employer's review cycle,” says Peter Macaluso, vice president of FM International, a retirement services company. “So when you are due for a raise of 2% to 4%, you can auto-escalate your 401(k) deferrals by 1% or so around the same time. It's a way to save more without feeling it in your pocket." In fact, one study found that auto-escalation alone helped boost savings for some workers by up to 28%.
If your company doesn’t offer an auto-escalation feature, or if you contribute to an IRA instead of a 401(k), consider setting a periodic calendar alert (once every six months is a good frequency) to remind yourself to review your contributions and see how much you can afford to boost your contributions.
Small Move #3: Roll Over Old Retirement Accounts
Whenever you start a new job, you’re likely also enrolling in a new 401(k) plan. And, for many people, that often means juggling two, three, four or more accounts at any given time.
Keeping separate 401(k) accounts can be annoying for two reasons. First, from an organizational standpoint, you have multiple sets of paperwork, online passwords and account balances to track. There's also the fact that leaving your money in an old 401(k) means that you may not be in the loop on changes that a previous employer may have made to a plan since you left the company.
Second, if you keep separate accounts, you’re also paying separate fees. You’re being charged administrative fees for each account on top of the aforementioned expense ratios—costs that can eat into your returns. “Even if [your administrative fees] are just $30 or $40 per year, that’s still something,” Blaylock says. “Plus, you can monitor your investments more closely if they are consolidated in one place.”
So consider saving yourself some trouble by rolling everything into a single 401(k) account. Just be sure to discuss with your Planner the best route to take—whether it’s rolling your old 401(k)s into your current one, or rolling old balances into a single IRA—because a recent government report revealed that plan providers aren’t always up front about all of the options best suited for you.
RELATED: IRS Changes the Rules for Rollovers
Small Move #4: Find "Areas of Opportunity" in Your Budget
As a premium client, you have access to your spending history in your LearnVest.com account, which can be useful for locating what Blaylock calls “areas of opportunity” for cutting back. Once you’ve pinpointed costs that can be trimmed, you can then consider transferring those savings into your retirement account.
You can start by taking a look at the “How You’re Spending” history on your dashboard. Were there particular months when you went over budget or your spending seemed higher than usual? Next, review your transaction history during those high-spending months to see if there’s a particular cost you could cut back on. You can also go through your fixed-cost folders to determine if there’s a regularly recurring bill you can live without, such as a subscription service.
“Is there something you don’t enjoy or use often?” Blaylock asks. “For example, my house alarm [service] is something I haven’t used in years. So, at one point, I asked myself, 'Why am I still doing this?' ”
Once you’ve isolated your own "areas of opportunity," ask yourself: What is a need versus a want? Then see which "wants" you can eliminate, so you can put that extra savings toward retirement. "Almost everyone can look at their budgets and find at least $50 extra per month," Blaylock says.
Small Move #5: Ramp Up Your Challenges
Need extra motivation to push you to save smarter? This is where the challenges assigned by your LearnVest Planner can really help. Since your Planner is providing you with customized advice that lines up with your financial goals, don’t be afraid to speak up if you might need a little pick-me-up in a particular area of your money life.
Are you procrastinating about rolling over your 401(k)? Your CFP can assign you a challenge with a stricter deadline—and maybe even some extra accountability via email check-ins. Or perhaps you’ve been meaning to check your retirement portfolio to decide if you need to rebalance. A new challenge and deadline can help give you an extra shoulder tap to get the task done.
Think of your Planner as a personal trainer for your money—except instead of building fitness, you’re building your retirement savings muscle.
Small Move #6: Play a Little "Catch Up"
Here's one sweet benefit to getting older: If you’re at least 50, you can take advantage of catch-up retirement contributions—up to $5,500 to your 401(k) or $1,000 to your IRA (as of 2014)—over and above the standard contribution limits.
"The timing [of catch-up contributions] for a lot of people is great because, at that age, your kids are typically done with or almost done with college and you likely have more discretionary income," says Bill Losey, CFP® and author of Retire in a Weekend. "Those catch-up contributions can make a substantial difference."
And remember that no matter how old you are, you’re not limited to keeping just one type of retirement account. Indeed, you may have to contribute to more than one in order to meet your retirement goals, especially if you started saving later in life. So if you max out your 401(k) every year and can afford to save more, check to see if you qualify to contribute to a Roth or Traditional IRA here. Or, you can consider opening a brokerage account to help make additional savings contributions.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.