Experts say this is one of the best ways to maximize your retirement income

It turns out one of the best retirement tools out there has likely been under your nose the entire time.

Saving for retirement is hard, and most soon-to-be-retirees aren't prepared enough. The average retirement costs upwards of $738,000, according to the 2017 Merrill Lynch Finances in Retirement Survey, and nearly half of baby boomers have nothing saved for retirement, per Insured Retirement Institute estimates.

11 ways to retire with $1M:

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11 ways to retire with $1M

Make a Commitment to Save for Retirement

If saving for retirement isn’t a priority for you, consider this: If you’re struggling to get by now on a small paycheck, how will you get by in retirement without savings and no paycheck? You don’t want to retire broke and live on Social Security benefits alone.

“It can certainly be challenging to build up a good-sized nest egg, but it will certainly be impossible if you never try,” said Belinda Rosenblum, a certified public accountant and president of Own Your Money. “It all starts with a commitment.”

To ensure you follow through on your commitment to saving, let your family or friends know about your financial goals, said Polly Scott, spokeswoman for the 2017 National Retirement Security Week promoted by the National Association of Government Defined Contribution Administrators.

“If you talk about it … you’re more likely to do it,” she said.

Know Your Number

You might be asking yourself, “How much do I need to retire? Do I really need to save $1 million?” The answer will vary from person to person.

“One million dollars isn’t the magic number,” Scott said. “In most cases, it doesn’t even have to be close to that number.”

So, the first thing you need to do is calculate how much you need to have to retire and how much you should save each month to reach that goal. There are plenty of free online retirement calculators — such as ones at Fidelity, Schwab and Vanguard — that can help.

Once you know how much you need to set aside each month to reach your savings goal, you can create a plan to make it happen.

“Even if you don’t get to $1 million and you only get to $100,000, at least you’re not retiring on just Social Security,” Scott said.

Start Saving as Soon as Possible

The sooner you start saving, the less you’ll have to set aside each month to save $1 million for retirement — which is good news if your income is low.

“If you are age 30 today and invest $600 a month from now to age 65, if your investments earn an average return of 7 percent a year, by age 65 you’ll have $1 million,” said Dana Anspach, founder and CEO of financial planning firm Sensible Money. “If you’re starting at age 40, you’ll need to be able to put away about $1,300 a month to get to $1 million by age 65 — still assuming a 7 percent return.”

If you start saving at age 20, you could set aside less than $300 a month and have $1 million by age 65, assuming a 7 percent annual return. By starting at this younger age, you’d need to save half as much each month as you would have to if you waited until 30 and about one-fourth as much if you waited until 40 to start building a $1 million nest egg.

Find Room in Your Budget to Save

If you’re making less than $50,000 a year, you might be wondering how you can find room in your budget to save several hundred dollars a month.

“First, you have to want financial freedom just as much as you want other things in life,” Anspach said. Focusing on that goal helps you see the payoff from cutting costs from your budget, which can range from finding less-expensive housing to buying things used rather than new, she said.

“Even something as small as giving up soft drinks in favor of water can lead to big savings,” Anspach said. “Suppose you spend an average of $12 a week on soft drinks and tea. That’s $624 a year.”

Rosenblum said you can cut $250 out of your monthly budget easily to put into savings by opting for a lower-cost cable TV package, slashing your grocery bill by planning meals to eliminate food waste, and eating out or getting take-out less often. Resources such as 5 Dollar Dinners can help you make low-cost meals at home, she said.

Be Consistent

In reality, “becoming a millionaire is less about how much you make and more about consistency,” said Deacon Hayes, founder of WellKeptWallet.com and author of the forthcoming book, “You Can Retire Early!”

“One way to ensure that you actually invest consistently is by setting up an automatic transfer from your bank to your investing account," he said. "This way, you can stick to your investing strategy without much thought required each month.”

If your employer offers a workplace retirement plan such as a 401k, you can have contributions automatically deducted from your paycheck. If you were automatically enrolled in your employer’s plan, check your contribution amount to make sure you’re saving enough each month to reach your savings goal. “You need to be contributing a minimum of 10 percent of pay,” Scott said.

If you don’t have access to a workplace retirement plan, you can save for retirement on your own by setting up automatic transfers from your checking account to an individual retirement account, such as a Roth IRA or a solo 401k if you’re self-employed.

“Make [the] commitment to pay yourself first then work your lifestyle around what’s left,” Scott said.

Take Advantage of Matching Contributions From Your Employer

A great way to boost your retirement savings is to find out if your employer will match your contributions to your workplace retirement account. The most common match is a dollar-for-dollar match. But, typically, you have to save a certain percentage of your income to get the full match.

Twenty-five percent of employees miss out on this free money because they don’t contribute enough to their retirement plan to get their employer’s full matching contribution, according to Financial Engines, an independent investment adviser website.

“If you work for an employer that offers a retirement plan and a company match, be sure to contribute enough to receive the full employer match,” Anspach said. “Many employers match up to 3 percent of your pay. At $50,000 a year of income, that adds up to $1,500 a year of employer-provided funds.”

Save Your Tax Refund

If you get a big tax refund, you should put that money into retirement savings, Rosenblum said. The average refund for the 2017 filing season was $2,782, according to the IRS. If you earn $50,000 a year, stashing a refund of that size would be equivalent to saving about 6 percent of your income, she said.

Or, you could adjust your tax withholding by filling out a new Form W-4 to put more money back into your paycheck each month rather than get a big refund each spring. Then, use that extra money in your paycheck to boost your automatic contribution to your 401k or workplace retirement account.

Get a Side Gig to Boost Savings

Another way to come up with more cash to retire with $1 million is to get a side gig to boost your income. Both Scott and Rosenblum recommend finding a second job and stashing those earnings into a retirement or investment account.

You could open a Roth IRA and contribute up to $5,500 a year if you’re single and your modified adjusted gross income is less than $118,000 or married with a modified AGI of less than $186,000. The big benefit of this account is that you can withdraw money tax-free in retirement. Withdrawals in retirement from a 401k or traditional IRA are taxed as regular income.

Choose Investments That Offer Growth

To increase your chances of having $1 million in retirement, you need to invest your savings in assets that will grow.

“No one gets rich by saving in the bank,” said Byrke Sestok, a certified financial planner and president of Rightirement Wealth Partners in White Plains, N.Y. “If you have 30 years before retirement and 30 years during retirement, then you have the time to participate heavily or totally in the stock market, and ignore the big drops and focus on the fact that stocks have historically proved to be a better-performing asset class over bonds and cash.”

That doesn’t necessarily mean it’s up to you to pick the right stocks, though. See if your 401k or workplace retirement plan offers index funds, which track the performance of a broad stock market index such as the S&P 500. Or, Scott recommends target-date funds, which have managers who shift your portfolio allocation over time from stocks to more conservative investments as you near retirement age.

Opt for Alternative Investments

If you make less than $50,000 a year, there’s only so much you can afford to set aside in savings each month. So rather than save your way to $1 million, build your net worth through investing in real estate or starting a business, said Todd Tresidder, wealth coach at Financial Mentor.

“Think outside the traditional model — go to alternative assets,” he said.

Don’t assume your lower income limits your ability to pursue either of these alternative assets. You don’t necessarily have to have money to start a business, Tresidder said. You just need an idea, and you have to be willing to put in the hard work to make it happen.

If you want to invest in real estate, Tresidder said you can get a loan for a small, inexpensive property, fix it up on your own and flip it for a small profit. Then you can use that equity to buy your first rental property that will generate a stream of income.

Don’t Tap Retirement Savings Before You Retire

You can cash out a 401k when changing jobs, but that will seriously hurt your chances of saving $1 million for retirement.

“Don’t ever do that,” Scott said. “That is very destructive to your retirement security.”

Not only will you have to pay state and federal income taxes, but also you will have to pay a 10 percent early withdrawal penalty on the money you withdraw. Plus, most people don’t go back and replace what is withdrawn, Scott said. So, they miss out on investment earnings.

To avoid having to tap retirement savings — whether it’s to get you through a period of unemployment or to pay for emergencies — Scott recommends that you build an emergency fund. Set aside cash in a savings account each month so you can access if you’re hit with an unexpected expense.

“You don’t want to be in a situation where you’re in an emergency and raid your retirement account,” she said. “That’s counterproductive.”

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Fortunately, even if your savings aren't quite where you want them to be, there's still a near-guaranteed way to maximize your retirement income: Social Security. Researchers at the Stanford Center on Longevity found that Social Security benefits are one of the best ways to stretch your retirement income, not least because they're adjusted for inflation and you'll receive them for the rest of your life.

Making the most of Social Security

An added bonus of Social Security benefits is that they're flexible: You're can start receiving them as early as age 62, or you can delay them up until age 70 if you want bigger checks. Claiming benefits once you reach your full retirement age (which is 65 to 67 depending on the year you were born) will earn you your full benefit amount. But claim before that and you'll receive more -- but smaller -- checks. Delay claiming until you're past your full retirement age, and you'll receive a boost in benefits each month to make up for the years you weren't receiving Social Security checks.

If you're struggling to save for retirement on your own and you expect to depend on Social Security for much of your income, then it's wise to wait as long as you can to start claiming benefits.

For example, say your full benefit amount is $1,400 per month. Let's also say your full retirement age is 67 years. If you claim benefits early at 62, your checks will be cut by 30% -- leaving you with just $980 per month. However, if you delay benefits and wait until age 70 to file, you'll receive 124% of your monthly benefit -- or $1,736 per month.

A couple hundred dollars per month may not seem like a huge difference, but it adds up over time. That $980 per month translates to around $11,760 per year, while $1,736 amounts to $20,832 per year. Here's what your lifetime benefits would look like if you claim at 62 versus age 70:

AgeLifetime Benefits When Claiming at 62Lifetime Benefits When Claiming at 70
62$11,760$0
70$94,080$20,832
75$152,880$104,160
80$211,680$208,320
85$270,480$312,480
90$329,280$416,640

Of course, nobody knows exactly how long they'll live, so it's impossible to know whether you'll come out ahead by delaying benefits or if you're better off claiming early. But with life expectancies on the rise -- one in four 65-year-olds can expect to live past age 90, according to the Social Security Administration, and one in 10 make it past 95 -- delaying benefits can add an extra cushion if you outlive your independent savings.

Granted, not everyone can wait until age 70 to start claiming benefits. Maybe you were forced to retire early because of health reasons or job loss, and you need Social Security to get by. But if you have the choice to either claim early or delay, and your savings are lacking, then it's a good idea to wait a few years and make the most of these benefits.

Social Security isn't a magic potion

While Social Security benefits can help boost your retirement income and add a cushion to your savings, you shouldn't rely on them completely to make ends meet. The average beneficiary receives around $1,413 per month, which amounts to just under $17,000 per year. That's not a lot to live on if you're going to be completely dependent on Social Security to pay your bills.

To further complicate matters, there's a chance that there will be cuts in Social Security in the relatively near future. According to the Social Security Board of Trustees, there's currently more cash flowing out of the system than is coming in -- partly as a result of the massive number of baby boomers retiring each day and partly because life expectancies are continuing to increase, depleting the program's cash reserves. And by 2034, Social Security's trust funds -- which are currently preventing the program from running a deficit -- will be exhausted. While that won't lead to a collapse of the entire system (after all, Social Security will continue to exist as long as employees continue to pay their taxes), but it may result in cuts in benefits of up to 23%.

Of course, it's possible Congress will figure out a solution before 2034 to avoid this problem. However, it's better to be safe than sorry, and banking on the hope that it will all sort itself out by the time you retire is not the wisest decision. That's why it's still important to focus on your own savings outside of Social Security to strengthen your nest egg as much as possible.

To make the most of your benefits, it's important to be strategic about when you claim and not rely too much on Social Security to make ends meet. But when used wisely, Social Security is a huge asset that can maximize your retirement income when your savings are falling short.

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