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       Tips to help you boost your retirement savings — whatever your age

Whether you just started working or you're nearly done, you can still potentially grow your nest egg.

When planning for retirement, the truth is that the earlier you start saving, the better off you could be, thanks to the power of compound interest. But even if you began saving late or have yet to begin, it's important to know that you're not alone, and there are steps you can take to increase your retirement savings. "It's never too late to get started," says Christopher Vale, senior vice president, Digital Advice and Investment Solutions, Bank of America.

Consider the following tips, which can help you boost your savings — regardless of your current stage of life — and pursue the retirement you envision.

1. Focus on starting today

If you're just beginning to put money away for retirement, start saving as much as you can now. That way you let compound interest — the ability of your assets to generate earnings, which are reinvested to generate their own earnings — have an opportunity to work in your favor. "The earlier you can get started, the better off you'll be," Vale says.

Starting to invest early on — even just a small amount — may help you in retirement

By starting to put away money earlier, a 25-year-old investing approximately $200 per month ($2,400/year) accumulates more assets by age 65 than if he or she had started to invest $300 per month ($3,600/year) at age 35 — despite investing less each period. Investing a smaller dollar amount over a long time can have a greater impact on investment results than investing a larger dollar amount for a shorter period.

Bar chart displaying examples of asset value that could be earned by a 25 year old giving $75 per month and a 35 year old giving $100 per month, by age 65. A 25 year old giving $75 per month may generate $88,943 at a 4% rate of return, $150,109 at a 6% rate of return, or $263,571 at an 8% rate of return by age 65. A 35 year old giving $100 per month may generate $69,636 at a 4% rate of return, $100,954 at a 6% rate of return, or $150,030 at an 8% rate of return by age 65.

This assumes an average annual nominal return of 7.8%.

Source: Chief Investment Office. This example is hypothetical and does not represent the performance of a particular investment. Results will vary. Actual investing includes fees and other expenses that may result in lower returns than this hypothetical example.

Contribute to your 401(k) account

If your employer offers a traditional 401(k) plan and you're eligible, it may allow you to contribute pre-tax money, which can potentially be a significant advantage. Say you're in the 12% tax bracket and plan to contribute $100 per pay period. Since that money comes out of your paycheck before federal income taxes are assessed, your take-home pay will drop by only $88 (plus the amount of applicable state and local income tax and Social Security and Medicare tax). That means you can invest more of your income without feeling it as much in your monthly budget.Footnote 1 If your employer's 401(k) plan also offers a Roth 401(k) feature, which uses income after taxes rather than pre-tax funds, you should consider what your income tax bracket is likely to be in retirement to help you decide whether this is the right choice for you. Even if you leave that employer, you have choices on what to do with your 401(k) account.

3. Meet your employer's match

"If your employer offers to match your 401(k) plan contributions, make sure you contribute at least enough to take full advantage of the match," Vale says. For example, an employer may offer to match 50% of employee contributions up to 5% of your salary. That means if you earn $50,000 a year and contribute $2,500 to your retirement plan, your employer would kick in another $1,250. It's essentially free money. Don't leave it on the table.

4. Open an IRA

Consider establishing an individual retirement account (IRA) to help build your nest egg. You have two options: a traditional IRA or a Roth IRA. A traditional IRA may be right for you depending on your income and whether you or your spouse are eligible to participate in a workplace retirement plan. Contributions to a traditional IRA may be tax deductible, and the potential investment earnings have the opportunity to grow tax deferred until you make withdrawals during retirement. If you meet the phased-out modified adjusted gross income limits, which are based on your federal tax filing status, a Roth IRA may be a good choice for you.Footnote 2 A Roth IRA is funded with after-tax contributions, so once you have turned age 59½, qualified distributions, including any potential earnings, are federal income tax-free (and may be state income tax-free) if certain holding period requirements are satisfied. To determine what type of IRA could work best for you, go to the Merrill Retirement Account Selector Tool and view the most current 401(k) and IRA contribution limits.

5. Take advantage of catch-up contributions if you're age 50 or older

One of the reasons it's important to start saving early if you can is that yearly contributions to IRAs and 401(k) plans are limited. The good news? As of the calendar year you reach age 50, you're eligible to go beyond the normal limits with catch-up contributions to IRAs and 401(k)s.Footnote 3 So if over the years you haven't been able to save as much as you would've liked, catch-up contributions can help boost your retirement savings.

6. Automate your savings

You've probably heard the phrase "pay yourself first." Make your retirement contributions automatic each month, and you'll have the opportunity to potentially grow your nest egg without having to think about it, Vale says. You can automate your investment selection with the Merrill Automatic Investment Plan, which invests assets automatically in specific funds.Footnote 4

7. Rein in spending

Examine your budget. You might negotiate a lower rate on your car insurance or save by bringing your lunch to work instead of buying it. Using an online tool like our cash flow calculator can help you determine where your money is going — and find places to reduce spending so you have more to save or invest.