If you can afford to, increasing your contributions by 1 percentage point each year — say, from 5 percent of your salary to 6 percent — can make a big difference in the long run, said Brendan Mullooly, a financial planner in Wall Township, N.J.
Steven Brett, president of Marcum Financial Services in New York, offered this additional advice: “Start as early as possible and take advantage of compounding and time. The earlier you do it, the less you have to put away.”
If your employer doesn’t offer a retirement plan, you can open an individual retirement account. Contribution limits to I.R.A.s are also increasing next year, for the first time in five years. For 2019, you can contribute up to $6,000, an increase of $500. People 50 and older can save an extra $1,000, for a total of $7,000.
Here are some questions and answers about retirement savings:
Is it too late to contribute more to my 401(k) for 2018?
Marina Edwards, a senior director of retirement with Willis Towers Watson, suggested that workers ask their human resources department to provide an estimate of what their contributions will be for this year. If they haven’t met this year’s maximum contribution of $18,500, and can afford to put away more money, they may want to consider increasing their payroll contributions.
Is it better to contribute to my 401(k), or to a health savings account?
Contribute to both if you are eligible, Ms. Edwards said. H.S.A.s are special savings accounts available to people with certain high-deductible health insurance plans. Their “triple tax” benefit makes them an excellent way to save, she said. Money goes in tax free, grows tax free and is withdrawn tax free, when the money is spent on eligible health and medical expenses.
Many people confuse H.S.A.s with flexible health spending accounts, which are geared toward short-term health needs, Ms. Edwards said. You can use the money in an H.S.A. for current health needs if you must, but letting it grow long term is smart, she said, since most people will have health needs in retirement.
Ms. Edwards suggests a three-step approach: Contribute to your 401(k) up to the company match. Then fund your H.S.A., to the maximum if possible. (For 2018, individuals can contribute up to $3,450; the total rises to $3,500 in 2019. The limit for catch-up contributions by those 55 and older remains $1,000.)