Business 401(k) Services / 401(k) Plan Optimization
Going for Retirement Gold
Saving for retirement is something huge you can work for every single day. With some discipline and an eye on the goal, you can take ownership of your future.
When athletes make it to the podium, the medal around their neck isn’t something that happened for them overnight. Top athletes dedicate years of discipline and hard work to earning their gold. Likewise, retirement isn’t something that just happens when we reach the age of 65. The gold medalists of savings are known as “super savers,” and they work hard to reach their annual 401(k) contribution limits of $22,500 (or $30,000 for people over 50) and beyond. To them, there’s as much of a challenge (and a thrill!) in saving as there is for athletes competing before the whole world.
Maybe you don’t see yourself strapping on a pair of skis anytime soon, but saving for retirement is something huge you can work for every single day. With some discipline and an eye on the goal, you can take ownership of your future. Here’s how the super savers make their dreams come true, and what they can teach you about retirement planning.
The Super Saver Approach
The country’s best retirement savers all have one thing in common: They have a vision for their future, and they’re willing to put in the hard work to make that vision a reality. That means taking stock of financial goals and realities, setting and sticking to a savings-based budget, and focusing on making the most of earning power.
Step 1: Run the Numbers
For super savers, knowledge is power. The first step towards maximizing saving is to take stock of your financial obligations and goals. Consider the story of one woman who knew that right out of college, she wanted to focus on paying off her $50,000 in student loan debt in only four years—while still prioritizing retirement savings.1 She looked at the debt she wanted to repay, her salary, and also her retirement goals, and set a short-term plan to dedicate 40% of her income to loan payments, 10% to retirement savings, and 50% to her living expenses.
If your goal is to maximize your retirement contributions, determine what percentage of your income you need to commit, then start thinking about what kind of budget you need to make that work.
Step 2: Commit to a Savings-Based Budget
Super savers put saving first when it comes to budgeting. Rather than setting aside what’s left after considering their other expenses, they focus on doing the most with the income they have left after reaching their savings goals. Not all super savers are alike, but they tend to do this in two key ways:
- DIY Attitude: Some super savers say their goal isn’t so much to budget every dollar they spend, but to simply challenge themselves to see how little they can spend. This has led some to learn how to become as self-sufficient as possible, making extra room for saving in their budget by learning skills like cutting their own hair or making their own repairs around the house.
- Humble Choices: According to a recent survey of super savers—here defined as people who save 90% or more of their maximum 401(k) contribution limit—frugality is a common trait in this group.2 Nearly half of respondents said they never purchase new vehicles, preferring older cars with lower price tags, and 45% attribute their ability to save to a choice to own a modest home with reasonable monthly costs.
Step 3: Focus on Earning Power
The final key to the super saver approach is prioritizing earning and making the most of your ability to generate wealth. The same survey of super savers suggested a common ability to manage job-related stress in the name of having extra money to save for the future.3 Many super savers also embrace sources of side income, like second jobs or alternative forms of income like renting out a room on room sharing websites or driving for ride sharing companies.
Another way to increase earning power is to get serious about investing. Many 401(k) plans offer a variety of different investment options, for investors with different goals. Some 401(k) advisers offer model portfolios to help investors base their own investing strategies upon, or will even help investors build their custom portfolio of stocks and bonds. For the most experienced and hands-on investors, Self-Directed Brokerage Accounts open up an even broader range of investment options, as well as the ability to manage 401(k) investments and outside assets in a unified strategy.
There are only so many gold medals to be won, but a secure retirement is a prize within anyone’s grasp. With a focused plan and plenty of discipline, you can become a super saver and make your dreams come true.
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