4 easy ways to increase your retirement income

1. Reduce your investment expenses and fees. Just like inflation can eat into your buying power, any costs related to your investments reduce your return. The easiest way to increase what you earn is to simply reduce your costs.

Especially if you’re invested in mutual funds and exchange-traded funds, you’ve probably got hidden fees. Typical costs include the expense ratio for each mutual fund or exchange-traded funds you own. That’s a fee you pay to the manager of that fund. This fee doesn’t appear on your mutual fund statements, so you have to look for it. This fee is in addition to what you pay your financial advisor if you didn’t buy the funds direct.

There can be other fees, too, such as transaction fees and loads. Always take these fees into consideration when choosing mutual funds and ETFs. With so many products out there, it’s likely there is a lower-cost, similar option.

If you use a financial advisor, be sure to always ask if he or she is using the lowest-cost options for each investment in your portfolio. This is critically important, as even a small percentage compounded over time can make a significant difference in the future. And it’s unfortunately far too common for investors to be put into more expensive investments because they pay the broker a bigger commission.

The end result? Even a modest decrease in investment expenses can result in additional yield for you, which keeps your money working harder for you without taking on any additional risk.

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2. Use the most tax-efficient manner. As the old adage goes, it’s not what you make, it’s what you keep that matters. A second way to reduce costs, also without increasing your risk, is to reduce the amount of taxes you have to pay. One way to do this is to make sure you are holding investments with the highest potential tax liability in your tax-deferred accounts (such as a 401(k) plan or a traditional IRA).

Conversely, you would then keep investments with low tax loads in your taxable accounts. For example, investments that may generate ordinary income or short-term capital gains may be best held in your tax-deferred accounts. This might include taxable bond investments, where your interest payments are taxed at higher ordinary income rates. Then, you would keep more tax-efficient investments such as tax-free municipal bonds in your taxable accounts. These small adjustments can help increase the portion of your returns you keep, all with no extra risk.

3. Don’t miss out on catch-up contributions. Investing in tax-deferred vehicles is one of the few ways we can turbocharge our investing without extra risk. But our annual contributions are limited. Fortunately, once you are age 50 or beyond, you’re allowed to make additional contributions, which means you can put more into your IRAs, 401(k) plans and other retirement accounts.

There’s also health savings account catch-up contribution allowed once you are 55 or older. All these options allow you to put away more, so you can have more money available to you in retirement. This is a valuable and often underutilized way to boost your retirement savings.

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