For many people, the prospect of saving for the future and planning for retirement is daunting. You may feel like you have no options to increase your savings, or worry that you’ll have to make major sacrifices in retirement. You’re not alone—millions of Americans over the age of 40 lack substantial nest eggs for retirement.

However, don’t despair. There are many strategies to substantially boost your savings, even if you feel behind. People under the age of 40 have even more options to get a jumpstart on retirement savings, considering the power of compounded interest.

Some of the strategies you can use to quickly increase your retirement savings include:

 

  1. Invest in permanent life insurance.

Most people have heard that they should buy term life insurance and invest the rest of their money, rather than going for the more expensive option of permanent life insurance. This option can work for some people, but many others end up spending the money they would otherwise invest, despite their best intentions. For many retirees, permanent life insurance is a better option.

With permanent life insurance, you’ll pay ongoing premiums, which is a sort of automated savings. Each premium increases the cash value of the policy tax-free, and you can borrow funds against the policy or sometimes withdraw cash from it. In addition, the policy will pay out death benefits, which aren’t subject to income taxes. In other words, permanent life insurance can serve as a way of supplementing your retirement income with non-taxable money. Think of permanent life insurance as a sort of bond or certificate of deposit (CD) that increases in value steadily over time.

 

  1. Save the raise.

As you advance in you career, you’ll likely receive raises that provide a little extra room in your budget. While a raise can sometimes relieve the pressure on a tight budget, many people can make ends meet without the extra income. Frequently, a raise just leads to a corresponding increase in spending. But what would happen if you saved your raise instead? If you put that extra income into a retirement account rather than buying a nicer car or new home, for example, you’ll set yourself up for a more comfortable retirement where you won’t have to sacrifice much to maintain your standard of living. The best part about this strategy is that you won’t have to make cuts to your budget or feel pinched by the extra savings, since you’ll still enjoy the same monthly income.

retirement

 

  1. Take advantage of Roth savings.

Research has shown that Roth accounts are one of the most underutilized retirement preparation strategies. Many people understand the importance of maxing out a 401(k) and taking advantage of employer matching, but aren’t aware that they can do even more. Roth accounts are funded with after-tax income, but withdrawals during retirement are not subject to taxes. This option is especially good for people who may be in a higher tax bracket in retirement than they currently are. The other value of a Roth account is its potential to diversify your retirement savings. With both tax-deferred and Roth accounts, you can minimize the potential impact of future tax changes.

 

  1. Purchase a home.

There’s still debate about whether buying or renting makes better financial sense. In some areas, renting a home is certainly cheaper in the short term than a down payment, mortgage, and property taxes. At the same time, research by the Harvard University Joint Center for Housing Studies shows that people who own homes tend to increase their wealth significantly more than renters, even after controlling for socio-economic differences and other factors. This may be because home ownership is a type of forced savings. Every mortgage payment builds equity in your home. You pay down your debt on the home while its value likely increases. Of course, it’s important to think strategically about home ownership and realize it is a long-term investment. If you buy and sell homes frequently, you’ll squander any gains on closing fees and other one-time expenses.

home

 

  1. Fund a Health Savings Account.

Not everyone is eligible for a Health Savings Account (HSA), but those who are often fail to use them strategically as they prepare for retirement. Contributions to an HSA are tax-deductible and can be invested to fund qualified healthcare expenses you’ll encounter later in life, including during retirement. Very few people use an HSA for long-term savings, even though the accounts can be rolled over annually. With healthcare costs typically increasing during retirement, it’s important to have money set aside to deal with these expenses. An HSA can help you offset the costs of healthcare without needing to rely on your primary sources of income. Ideally, you would start investing in an HSA early and invest the money so that it grows over time and serves as a sort of insurance.