As an investment advisor, I love studying the habits of individuals who have achieved a high level of confidence and serenity in their financial lives. One common factor I’ve observed is a consistent focus on the handful of things they can control (as opposed to endless worry about the multitude of factors that they can’t – such as what will happen with the Fiscal Cliff).

To help you focus on what you can control in your financial life, here are 3 simple retirement savings steps for you to consider in 2013.


Photo credit: Louis Leray

Tip #1: Take advantage of higher 401k, 403b and Thrift Savings Plan contribution limits for 2013. Despite their less-than-friendly sounding names, these programs all refer to something very warm and fuzzy: a straightforward way to save for your retirement via payroll deduction in the work place.

In 2013, you’ll be allowed to contribute $500 more to these plans than in 2012, bringing your total maximum possible annual contribution to $17,500 if you are under 50 years of age. Now, you may be thinking, “Big whoop-de-do. What’s an extra $500 a year in savings?” Well, if you are 25 years old and you save an extra $500 a year every year until you are age 70 and you earn a 7% average annual return over that time frame – saving that extra $500 a year is worth…. $142,000. Nothing to sneeze at! (Note, if you are over 50 the government allows you to contribute even more, an extra $5,500 on top of the new $17,500 limits bringing your maximum annual work place contribution to $23,000).

Tip #2: Take advantage of higher IRA contribution limits. For 2013, the limits for IRA contributions have been raised as well. If you have earned income from work and are under 50 years of age, you can contribute up to $5,500 in an IRA. If you are 50 or older, you can contribute an extra $1,000 or $6,500 a year. An important note to stay-at-home parents: you can also contribute to your own IRA based upon your spouse’s earnings from work.

Tip #3: If you qualify, take advantage of the Saver’s Credit. Transamerica’s Center for Retirement Research has studied this credit and found it to be quite underutilized, so don’t pass up on this valuable benefit if you qualify! Depending upon your tax filing status and adjusted gross income, you may be eligible for a tax credit of $1,000 to $2,000. For example, if your tax filing status is single, and your income is $29,500 or less, you may be eligible for a $1000 tax credit.

Note: a tax credit is much more valuable than a tax deduction, as it represents a dollar-for-dollar reduction in your income taxes (as compared to a deduction, which for someone with a 25% marginal tax rate would result in a savings of only $0.25 for every $1.00 of deductions).

So this year, focus on what you can control and consider these powerful steps to increase your retirement savings.