Find Hidden Sources of Money in Your Budget

Adopt some of the many effective techniques for finding sources of hidden money in your budget. When you reduce minor luxuries or defer a major purchase, you can redirect the money you've "saved" to help fund your retirement. Refinancing a high interest mortgage is an obvious example, but more subtle ways to save can also be found in everyday life. Some can be as small as scaling back on that extra cup of coffee or ordering take-out. Even though the amounts may seem small, over time they can really add up. If you're looking to find extra money in your budget, you might consider tracking your spending for a full week — actually writing down every cent spent — and then evaluate your spending habits to see if there might be choices you're willing to make.

This hypothetical chart shows the difference that one dollar saved can make.

IRAs for the Stay-at-Home Spouse

Non-wage earning spouses can contribute up to $4,000 for 2007 and $5,000 for 2008 to their own Roth IRA or Traditional IRA provided the other spouse qualifies and the couple files a joint federal income tax return. This IRA contribution is in addition to any IRA contribution the wage-earning spouse makes, meaning eligible married couples could contribute up to a combined total of $8,000 for the 2007 tax year and $10,000 for the 2008 tax year, to contributory IRAs each year. Spousal IRAs are also eligible for catch-up contributions.

If You're Age 50 or Older, Take Advantage of IRS Catch-Up Contributions

If you find later in life that your savings plan is off-track, there are ways to catch up. A special provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 allows investors age 50 and over to make "catch-up" contributions to IRAs (Roth and Traditional) and workplace savings plans such as 401(k)s, 403(b)s, and 457 plans, and SIMPLE IRAs, if allowed by their employer.

If you are 50 years old, you can take advantage of higher contribution limits in a 401(k) plan or IRA. This means a 50 year old can invest an additional $5,000 in a 401(k), bringing the maximum annual amount up to $20,500. For an IRA, you can contribute an additional $1,000 in 2007 and thereafter.

Consider a Tax-Deferred Annuity

If you have already maximized contributions to your workplace savings plan (e.g., 401(k), 403(b)) and IRA you may want to consider putting money toward a low cost tax-deferred annuity. Unlike other retirement savings accounts, there is virtually no annual limit on contributions to your tax-deferred annuity, which is why an annuity can be a good way to catch up your retirement savings.