Saving for retirement can be a sore subject for Americans approaching their golden years.

For those planning to retire by 65, their retirement fund will need to be big enough to replace up to 80% of their income for at least 15 years. If you earn the average wage in the U.S. of $40,000, this means you'll need to save at least $480,000 before you can retire.

Unfortunately, though, most of us aren't nearly saving like we should.

Almost half of U.S. workers say they don't feel confident they will have enough money to live comfortably through retirement. Around 43% of Americans have less than $10,000 in retirement savings, and around 27% have saved less than $1,000, according to a 2010 survey by the Employee Benefit Research Institute.

If you haven't been saving the 10% (or more) of your income that is recommended by financial advisors, you may be behind in the points race, but you're not out of the game. Here are five steps you can take today to increase your retirement savings as quickly as possible.

1. Downsize Your Life

Achieving a retirement savings goal means living below your means, which is why lowering your monthly expenses is critical. While you're still working, a lower cost of living allows for more savings, and when you retire, it means your savings will last longer.

Start by eliminating any high-interest debt, such as credit cards or unsecured loans. Next, look for ways that you can cut back on living expenses in favor of contributing to your retirement fund. Even if your house is paid for, if it's too large or requires constant maintenance, it could become a financial burden when you finally retire. Consider downsizing to a more affordable home with minimal upkeep.

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2. Stop Turning Down Free Money

If your employer matches your 401(k) plan contributions, you're earning a 100% return on your investment instantly, before you accrue any gains from the market. Some employers match $0.50 for every dollar (usually up to 4-6% of your salary), while others match 100% up to a certain contribution limit. It's essentially free money going toward your retirement savings.

At the very least, make it a priority to max out the matched contributions. Additionally, the contribution limits to a 401(k) for 2011 are $16,500, but plan participants who will reach age 50 within the calendar year can make additional catch-up contributions of $5,500.

Meet your contribution limit to the best of your ability. And if you qualify, take advantage of the additional contribution limits for late-stage savers. You'll even save a few bucks in taxes, as 401(k) contributions are taken from your paycheck pre-tax.

3. Increase Your Savings with an IRA

In addition to a 401(k), individual retirement accounts (IRAs) are tax-advantaged savings vehicles that can help boost your retirement savings. They're also a way for the self-employed to invest for retirement.

Contributions to a traditional IRA are tax-deferred, which makes it cheaper and easier to invest on the front end. However, once you access the funds after age 59 1/2 you will need to pay taxes on the amount you withdraw. Also, the funds must be withdrawn before you turn 70 1/2 years of age if you want to avoid extra penalties and taxation.

Roth IRA investments allow investors to contribute after-tax funds into the account. But once you are 59 1/2 years of age, the money can be withdrawn tax-free and without penalty, provided the funds have been in for at least five years.

The contribution limit for both a traditional IRA and a Roth is $6,000 for 2021, but if you're 50 or older, that limit is increased to $7,000. Even if you wait until age 50 to begin your retirement savings, investing $6,000 a year at an annual return of 8% will give you $162,912 by age 65. But if you start 15 years earlier, you'll have $365,529 thanks to the power of compounding (and that's assuming you only contribute $5,000 a year for the entire period).

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4. Consider Your Time Horizon

If you're running behind in your retirement savings, you need to be more aggressive with your portfolio. Traditionally, financial advisers recommend an investment strategy that focuses less on increasing your wealth than on maintaining it the closer you get to retirement.

But if you're arriving late to the party, you need the extra time to take full advantage of the growth potential that only the markets can provide. Talk with your financial advisor about the best mix for diversification and growth, while also protecting your gains from any sudden downturns.

5. Extend Your Working Years

One of the simplest ways to catch up on retirement savings is to work longer. This will give you more time to save for retirement and will also increase your Social Security benefits.

Workers who receive Social Security benefits at age 62 receive $1,172 per month, but if they work until age 66, their benefit will be $1,645. Wait until age 70 and the monthly benefit grows to $2,281.

Remaining in the work force a few years longer can also mean more time to contribute to your retirement savings -- and allow the power of compounding to work its magic. Although it's not the most popular choice, extending your working years can increase your confidence that you will be able to retire comfortably.

The Investing Answer: Reaching a retirement goal on time requires aggressive saving, maximizing tax advantages, lowering your expenses and keeping a diversified investment portfolio. The golden rule for saving for retirement may be to 'Start Early,' but for those who've been sidetracked by other expenses in life, the next best time is right now.

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Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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