Here’s How To Triple Your Retirement Savings

Once you retire, you may need more income than expected. That’s because some of your costs, such as health care, may increase as you age, while others may not decrease as you expect.

That is why it is so important to save independently for your retirement. If you’re overly dependent on Social Security, you can be pretty tight on cash.

Of course, building a solid nest egg can seem challenging. But here’s a way to make it easier: invest your money wisely. If you play your cards right, you can triple your retirement contributions and amass a nice sum of money in time for your senior years.

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Grow your wealth seamlessly

The great thing about investing is that it allows you to take money you don’t use and turn it into a bigger amount. While putting money into your IRA or 401(k) plan, you should invest it with the goal of earning the highest possible return without incurring undue risk.

To this end, it’s a good bet to top up stocks during your working years and switch to bonds as retirement approaches. Bonds are a poor investment choice for your 30s and 40s because the returns they provide may not be enough to grow your nest egg significantly over time. Stocks are riskier, of course, but if you get into them heavily during your 30s, 40s, and even 50s, you have the option of scaling back as your retirement approaches.

Now let’s assume you can spend $200 a month on a retirement plan over a 30-year period. Let’s also assume that your investments yield an average annual return of 7% during that time. That 7% return is slightly below the stock market average, and it also explains the fact that you may not have such a large stock position in your retirement plan during your last years of savings.

If you save $200 a month over 30 years, you’ll end up contributing $72,000 to your savings from your own paycheck. But with that 7% return, you’ll end up with about $227,000 in your nest egg after three decades. That is slightly more than triple the amount you invest.

Now see what happens if you only get an average annual return of 4% in your retirement plan because you stay away from stocks and load bonds. Assuming the same monthly contribution and savings window, you’ll end up with about $135,000. That’s a decent profit, but you’re not tripling your money like you would by investing in stocks.

Put your money to work

Some people who contribute to a retirement savings plan keep their money in cash or bonds and see minimal growth over the years. If you want to triple your savings, go heavy on stocks when it’s appropriate and scale back later in life. It’s a great way to amass a nice retirement pension without sacrificing too much.