Clever ways to save more for retirement
- Mike Brown
- Apr 2
- 3 min read
If you want to make your life better, sometimes you just have to outsmart yourself.
You know you should be putting away money for retirement, for example, but you never can seem to find the extra cash without making big sacrifices in the standard of living you’ve come to enjoy. If that’s you, it’s time to get creative.
Here are five mostly painless ways to divert more of your income toward your financial goals:
Bank your next raise. The next time you get a bump in pay, divert at least half of it into a retirement savings program, such as your 401(k). If you really feel behind, save all of your next raise. Remember, your lifestyle has a way of automatically expanding when your income does, if not faster.
Get the full 401(k) match. If your employer matches some or all of your retirement plan contributions and you’re not saving enough to claim the full match, you’re leaving money on the table. Money that could be compounding between now and retirement.
Round up your purchases. Back in the days when people paid in cash a lot more, I used to toss my loose change into an empty wine jug. When it got full, we would roll up the coins and deposit (most of) it into our savings account. Today, there are apps that round up debit and credit card purchases to the nearest dollar for you, automatically adding it to a savings or investment account. (And we’ve stopped buying wine by the jug.)
Get a cash rewards credit card. If you’re disciplined enough to pay your balance in full each month, look for a card that gives you cash back on every purchase. Some cards will even deposit the rewards into an investment account for you.
Save your “third paychecks”. Do you get paid every two weeks instead of twice month? If so, you’re getting 26 paychecks each year instead of 24. In the two months you receive a third paycheck, save it. Use it to fund a traditional IRA contribution, better yet a Roth IRA if you qualify.
That reminds me of a couple I met years ago who used to get paid every Friday, spending most of it paying bills and enjoying themselves over the weekend, and then hoping there was a little money left by the end of the week. One Friday, they didn’t make it to the bank on time and couldn’t cash their paycheck until the following Monday.
Having survived a weekend with no money to spend, they decided to wait until the following Tuesday to deposit the next one, then Wednesday, then Thursday, and so on until one Friday they had two paychecks in hand. They used the extra check to open a savings account.
After a year of playing this little game, the couple had received a total of 52 weekly paychecks but had spent only 44 of them. The eight “extra paychecks” went into savings, equating to an annual savings rate of just over 15%.
You don’t have to be a genius to save money for retirement. You just have to be a little smarter than you think you are once in a while.
Any opinions are those of Brown Family Wealth Advisors and not necessarily those of RJFS or Raymond James. Investments mentioned may not be suitable for all investors. Matching contributions from your employer may be subject to a vesting schedule. Please consult with your financial advisor for more information. Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free.
