3 ways you can save better for retirement

custom_retirement piggy bank

Retirement investing is mostly contextual. So much depends on your risk tolerance, how much time you have before you retire, and how much you can save.

However, there are a few best practices that are nearly universal. So keep these in mind, whether you're a few years from retirement or still have decades to go.

Reduce taxes where possible

Uncle Sam wants you saving for retirement, so the U.S. tax code has all kinds of incentives to sock away money for your golden years.

Your workplace retirement plan (whether 401(k), 403(b), TSP, etc.) comes with specific tax benefits. If it's a "traditional" 401(k) (or equivalent plan), you get to reduce your taxable income by a dollar for every dollar you put in. So if you save $18,500 (the limit for 2018 if you're under 50 years old; it's $24,500 if you're age 50 or older) in a 401(k), your taxable income will be reduced by $18,500 that year. That means you'd get to pocket a rather nice tax savings that year and not have to pay taxes on any of that money until you withdraw it in retirement.

Many workplace retirement plans also come in the "Roth" flavor -- which means you don't get to save on taxes this year, but that money won't be taxed at all in retirement. IRAs (which you can open on your own, and fund with up to $5,500 per year -- or $6,500 if you're age 55 or older) also come in both flavors. There are arguments for both, so learn more about Roth vs. Traditional accounts if you're unsure where you stand.

Take the free money

It's not just Uncle Sam who's trying to help you retire. Chances are good that, if your employer offers you access to a retirement plan like a 401(k), they also offer you some incentives to participate. Usually these incentives take the form of matching funds, whereby if you put a certain amount aside in your retirement plan, your employer will contribute some cash on top to help boost your account balance. For example, employers often offer a 50% match on contributions of up to 6% of an employee's salary. In that case, if you're setting aside 6% of your salary in your 401(k), your employer will contribute an additional amount equal to 3% of your salary.

In that example, you wouldn't get anything extra from your employer for anything you contribute above 6%, but you'd still get the tax benefits. Anyway, bottom line: At the very least, if at all possible, make sure you max out your employer match. Think about it this way: If you make $50,000 a year and contribute 6% for a 50% employer match, you're putting in $3,000 annually -- and your employer pays you an extra $1,500 in your 401(k) as a thank-you for doing that. That's a nice chunk of change.

A study published in 2015 estimated that American workers were leaving $24 billion in matching funds on the table each year (an average of $1,336 per worker who failed to take full advantage) by not maxing out their employer match. That's free money. Claim it.

Aggressively cut fees

Fees are one of the two great killers of investing returns -- second only to making bad investments. It can be difficult to predict how great or terrible an investment will be, but fortunately, fees are a lot easier to identify. And the savings are potentially huge. In fact, a 1-percentage-point reduction in fees could net you an extra $43,000 or more. How?

Let's say you invested $3,000 per year for 30 years into a fund that tracks the S&P 500, returns 6% annually (a little less than historical stock market returns), and has a 1.14% expense ratio. At the end of 30 years, you'll have a little over $201,000. That's a nice chunk of change.

Now let's say you put the same amounts into the Vanguard 500 Index Fund (VFINX) over the same time period at the same hypothetical annual return. The Vanguard fund, however, has a 0.14% expense ratio -- that's 1 percentage point lower than the other fund's, all for the same exact investments. You'd end 30 years with a little over $244,000 -- an extra $43,000 -- by tracking the same underlying investment.

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You can spend hours -- even days -- stressing about all the little nitpicky elements of saving for retirement. But this handful of "best practices" can get you pretty far for very little effort or stress. And so long as you're investing that saved money in good funds -- consider some of the best index funds for 2018, for example -- then you'll be well on your way to a great retirement.