Although the definition of “middle class” has evolved over the years, the one thing that has remained constant is that middle-income earnings are not keeping up with inflation. According to government data website USAFacts, middle-class Americans saw their share of the country’s overall wealth fall to 26% in 2022 from 37% three decades earlier. Over roughly the same period, middle-income households saw their median incomes rise 31% while consumer prices nearly doubled.
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One result is that dollars don’t go nearly as far now as they used to for the middle class. This puts added pressure on middle-class Americans to come up with smart retirement savings strategies. Here are six tips to save for your golden years.
Make Savings a Priority
Although middle-class workers are far from rich, most should have some extra money left over after paying the bills each month.
All or part of that money should go into retirement savings so it becomes a regular part of your financial routine. Setting up automatic transfers is one way to ensure your savings grow each month.
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Contribute To Your Employer’s Retirement Savings Plan
If your employer offers a 401(k) or other retirement plan, sign up and contribute to it. This is the best and easiest way to start building a retirement fund because you can grow your earnings tax-free and the money is automatically deducted from your paycheck.
When your employer matches your contribution, it amounts to free money added to your nest egg.
Invest In an IRA
If you don’t have access to a 401(k) or pension plan, start investing in an individual retirement account, or IRA, to serve as a retirement fund. An IRA offers tax advantages that are similar to a 401(k)’s.
Even if you have a company-sponsored plan, it’s still a good idea to invest in an IRA to save at a faster rate.
Max Out Your Contributions
In 2024, employees with a traditional 401(k) and similar plans can contribute up to $23,000 for the year. If you are 50 or older, the “catch-up” contribution is an additional $7,500. The maximum you can contribute to an IRA in 2024 is $7,000, though if you are 50 or older, you get an additional catch-up contribution of $1,000 to bring the total to $8,000.
Maxing out your contributions helps grow your savings faster.
Diversify Your Portfolio
In addition to putting money into retirement plans, you should put it into other savings or investment vehicles to ensure a balanced portfolio. Options include high-yield savings accounts, certificates of deposit and money market accounts, as well as stocks, bonds, mutual funds, exchange-traded funds and alternative investments, like real estate and business ventures.
Hire a Professional
Planning for retirement means developing an investment strategy that maximizes your returns while minimizing your risk. Most Americans lack expertise in this area, which means you should consult with a financial advisor to help you come up with the right plan.
For the best results, find advisors who hold professional certifications, such as Certified Financial Planner and Chartered Financial Consultant certifications.
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This article originally appeared on GOBankingRates.com: Middle-Class Retirement: 6 Tips To Save for Your Golden Years
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