Have you ever encouraged someone to do something positive in their lives for a long time and then FINALLY they do it? This happened to me and I could not be happier with the result.

A few years ago, I checked Facebook and discovered this message from my sister:

“Look what I found when I opened up the family computer this morning! :-O Thank you so much for having such a positive influence on my 18-year old!“

My 18-year old nephew was signing up for his first Roth IRA account! I was so happy for him!

By investing at 18 years old, the power of compound interest will make him a free, happy and wealthy millionaire.

Compound Interest Wins

Since he was such a hard worker that year, he had $2,000 saved. If he decided to put that $2k into a Roth IRA that year and then didn't touch it until he's 60, he'd potentially have around $50,000! (This assumes an 8% interest rate compounded annually)

Let's say he contributed the same amount annually until he's 60 … approximately $700,000!

And then how about the current Roth IRA maximum annual contribution of $7,000 per year? That'll get him to around $2,120,000! He's a millionaire in the making!

Are We Prepared for Retirement?

According to a recent study by Empower, the median 401k savings for people in their 60s is $210,724.

At a 4% withdrawal rate, that equates to around $8,400 per year in annual living costs.

Can you live on $8,400 per year?! Neither can I. So … let's all (including me) do like my nephew is doing and invest early and often for our retirement savings.

Here are 5 things we can do today to increase our retirement savings:

How to Increase Your Retirement Savings

1. Start investing in your workplace 401k

The sooner we start investing, the more money we’ll have in retirement. The magic of compound interest works best when you give it time to compound. You may not be 18 years old like my nephew was, but if you start investing today, it’s better than tomorrow … or next month … or next year!

You may be waiting for the next market crash, dip or recession. You are right that it’s coming, but I guarantee you don’t know when it’s happening. Time in the market is much better than timing the market. So get in, ride the roller coaster and don’t jump off.

2. Rebalance your 401k

Since the stock market has been on a tear for the past 9 years, your portfolio may be heavily weighted in equities. Take some time to balance your portfolio if you feel bonds should be a part of your mix.

Right now, I’m 90% stocks and 10% bonds because I’m a mid-30’s dude with 25 years to go to retirement. Every 6 months, I rebalance my retirement accounts using the Empower Asset Allocation feature (it’s free by the way). This helps me understand my current investment breakdown and if I need to make any adjustments.

3. Lower Your 401k Fees

If you’re not aware of Index Funds, it’s time that they become your 401k’s best buds.

These mutual funds track a broad market index (like the S&P 500) thus providing you with a comparable return. Given that the average annualized total return for the S&P 500 index over the past 90 years is 9.8%, according to CNBC, you should be a very a happy index fund investor. And depending on your provider (ahem, Vanguard), you will get extremely low fees in comparison to traditional mutual funds.

For a quick, affordable way to lower your fees without all of the hassles of researching investment options yourself, check out Empower again. This free money tool will help you with 401k diversification, knowing how much to rebalance and getting you the lowest fees possible.

4. Automatically Contribute to an IRA

Outside of the office place 401k, you can take advantage of an IRA as well. Once you decide whether a Traditional or Roth IRA makes the most sense for your situation, set up automatic contributions to ensure you are consistently investing for your future.

Once something is automated in our lives (debt payments, retirement contributions, saving deposits), we forget that we even had access to the money. If we don’t see it or touch it, we won’t spend it!

5. Max Out Your Annual Contributions

If you have the means, max out your 401k and IRA to get the most financial benefit.

Right now, the maximum annual contribution limit for a 401k is $23,500 and $7,000 for an IRA (be sure to check the IRS website for up to date information). By contributing the maximum, you’re taking advantage of tax-favored options that will help you save more down the road. Less for Uncle Sam and more for you …

Your future self will thank you!

If you know a teenager who has an earned income this year, sit down with them and show them the power of compound interest. Use this calculator and figure it out together.

Who knows? That conversation you have with them might be the story they tell their grandkids about how they became a millionaire.

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In what ways are you investing for your retirement?

How can we get more young people to understand the importance of compound interest?

Please let me know in the comments below.

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