6 Tips to Build a Strong Middle-Class Retirement Fund

While the definition of “middle class” has evolved over the years, one thing has remained constant: middle-class incomes have not kept pace with inflation. According to government data website USAFacts, the middle class’s share of the nation’s total wealth fell to 26% in 2022 from 37% 30 years ago. Over roughly the same period, median income for middle-class households increased 31% while consumer prices nearly doubled.

One consequence of this is that money is no longer flowing to the middle class as it once did. This puts added pressure on middle-class Americans to develop smart retirement planning strategies. Here are 6 tips to help you save for retirement:

Savings is a priority

Although middle-class workers are far from wealthy, most of us have something left over each month after paying our bills.

All or part of this money should go towards retirement savings and become part of your everyday routine. Setting up automatic transfers is one way to ensure you’re saving more each month.

Contribute to your employer’s retirement plan

If your employer offers a 401(k) or other retirement plan, sign up and contribute. This is the best and easiest way to start saving for retirement because you can grow your income tax-free and the money is automatically deducted from your paycheck.

If your employer matches your contribution, it’s added to your emergency fund for free.

Invest in an IRA

If you don’t have access to a 401(k) or retirement plan, start investing in an Individual Retirement Account (IRA) that acts as a retirement fund. An IRA offers similar tax benefits as a 401(k) plan.

Even if you have an employer-sponsored plan, you may want to invest in an IRA to save more quickly.

Maximize your contributions

In 2024, workers with a traditional 401(k) plan or similar plan can contribute up to $23,000 per year. If you’re over 50, your “catch-up” contribution is an additional $7,500. The maximum amount you can contribute to an IRA in 2024 is $7,000. However, if you’re over 50, you’ll get an additional $1,000 contribution, for a total of $8,000.

Maximizing your contributions will help your savings grow faster.

Diversify your portfolio

In addition to contributing to your retirement plan, you should also invest your funds in other forms of savings and investments to ensure a balanced portfolio. Options include high-yield savings accounts, certificates of deposit, money market accounts, and alternative investments such as stocks, bonds, mutual funds, exchange-traded funds, real estate and business ventures.

Hire an Expert

Planning for retirement means creating an investment strategy that will maximize your returns while minimizing your risks. Most Americans lack expertise in this area, so you should consult with a financial advisor to help you come up with a proper plan.

For best results, look for a consultant with a professional credential, such as Certified Financial Planner or Certified Financial Consultant.