“Super savers” are people who contribute significant portions of their income to their retirement funds. In doing so, they secure their financial peace of mind during retirement by ensuring they have ample funds to draw upon. Becoming a so-called super saver requires some upfront sacrifices, but making them now could lead to a more financially secure retirement for you. In this article, we’ll review the top tips you can follow to become a super saver — or to put more money towards funding your retirement while still living comfortably.
Start Early
They say it’s never too late to start. But you shouldn’t underestimate the value of starting early. The earlier you start saving for retirement, the more you can benefit from compound interest. This is when the interest you’re earning on your investments gains interest as well.
Taking advantage of compound interest throughout your working life can garner you more money in the bank by the time you’re ready for retirement. But in addition to starting early, the amount you’re saving each month and the types of investments you’re making matter too.
Set Income Goals
The income you earn during your working years directly impacts how much you can save for retirement. Setting solid income goals can be a key to becoming a super saver. The more you make, the more you can save. Setting aggressive but realistic income goals might just be what you need to do to join the ranks of other super savers.
Design Your Investment Portfolio Around Gradual Risk Reduction
Generally speaking, the greater the risk an investment has, the greater the potential for reward it also has. But the later you are in your career, the less risky you’ll likely want to be with your investments, particularly if you’ve built up a nice nest egg for retirement. As you approach retirement age, you might consider shifting your investment portfolio toward safer blue chip stocks and similar financial products. Super savers are often cautious and protect their hard-earned savings by limiting their exposure to risk.
Sacrifice in the Short Term
By its very nature, saving is about sacrificing in the short term for long-term gain. Super savers understand that, by putting away more of their income for retirement, they’re deferring their enjoyment of that money for later in life. This means that it’s common for super savers to do things like house hacking and driving older used cars instead of opting for the newest model. When you make sacrifices in the present — in this case, foregoing your ability to spend your income immediately by diverting it toward savings — you can build more security for your retirement.
Automate Your Savings
By some definitions, super savers set aside at least 15% of their income for retirement. Doing this continually can require plenty of planning. But one of the top secrets super savers have is that they automate their savings to remove the temptation to spend.
When you automate your savings, the funds come directly out of your account each paycheck. Before long, you might forget you ever had that extra income. All the while, it’ll be accruing interest for you in a retirement fund.
Keep Debts to a Minimum
When your debts are low, you’ll be able to save more. Not having to account for debt payments (with interest!) each month can free up funds for you to save. That’s why super savers typically try to pay off their entire credit card bills every cycle. They don’t allow debt to sit and accrue interest, which can set them off of their goals.
Weigh Your Investment Options
There are so many ways to save for retirement. You can go with a traditional 401(k), a Roth IRA, or something else entirely. Each option has its pros and cons. Super savers often opt for Roth IRAs because they pay tax on the deposited income upfront. Then, when they withdraw the funds from this type of retirement account later on in life, they don’t need to pay taxes on the withdrawals. This helps them avoid paying more in taxes in the future.
Resource Links
“How the top financial habits of ‘super savers’ can help you ‘build the most wealth’” via CNBC
“7 Secrets of Retirement ‘Super Savers’” via the AARP
“‘Super savers’ share 7 strategies they use to save more than half of their income” via Business Insider