September 8, 2020

Edited 10/13/20

I Started Saving Late But I’m Still on Track to Retire — Here Are My Savings Tips

Our members revealed their savings hacks to help you grow your retirement savings.

By now you’ve probably heard that many Americans aren’t prepared for retirement. But the retirement picture in the United States isn’t all doom and gloom. Many of our users will have enough saved to fund their retirement. And they shared their top savings tips with us, so we could pass them along to you. 

Starting early and saving consistently was a common theme among respondents. But even if you didn’t get an early start, it’s possible to save enough so you can retire comfortably, as one user explained. Here’s his story.

David S.

Age: 53
Occupation: Network Engineer
Location: Nebraska

David’s Story:

David got a late start saving for retirement because of family medical bills, but he’s tentatively on track to retire between 62 and 65. He began saving for retirement five years ago, after paying off $120,000 in medical debt. When he started, he had only $3,000 set aside for retirement, but today he has $50,000.

How He Did It:

David saves 20% of his gross salary in an employer-sponsored 401(k), and he plans to continue until he retires. His employer contributes about 1.25% in addition to what David puts in.

Since every month is a little different, David creates a new budget each month to cover basic living expenses and other bills he may have to pay that month. He worked hard to become debt-free. And if he wants to make a larger purchase, instead of putting it on a credit card or taking out a loan, he sets aside money every month until he has enough saved to pay for it with cash. 

If there’s any money left at the end of the month after he contributes to his 401(k), pays his regular expenses and takes care of life’s emergencies, he puts it in an after-tax account that he plans to use for retirement.

What David Says:

The biggest key is avoiding debt. I don’t make a lot of money, but now that I don’t have any debt, including a mortgage, it doesn’t take a lot of money to get by. I’m not going to retire a millionaire, but I’ll be okay because I got rid of debt. The best thing people can do is pay things off as quickly as they can because it gives you so much freedom to do what you want to do. 

I’ve found that the snowball method of [paying off the] smallest to largest [debt] works, because if I had just gone by interest rate, I probably wouldn’t have followed through. If I didn’t get those quick wins, I probably would’ve given up.

I also automate my savings. When I automate, it happens. When I don’t, life happens. When I don’t see [the money] in my check, I can’t spend it.

Plan Your Retirement Date

Knowing when you plan to retire or at least setting a ballpark year can help you plan in advance. However, you should be realistic about whether you’ll be able to retire by that date based on your financial projections. Using Silvur’s Retirement Score will help you project how long your money will last in retirement. So before you set your retirement date, see what your Retirement Score is and then work backwards to see how much savings you need in order to increase your score and savings.

More Tips From Silvur Users

In a recent survey, we asked Silvur users to share their best tips for saving for retirement. Here’s what they said.

  • Start contributing to your 401(k) and IRA at a young age. Contribute consistently, and don’t try to time your investments. Avoid making emotional decisions and continue to contribute to your retirement accounts even during a market downswing. If your investments pay dividends or earn capital gains, reinvest them.
  • If you’re married or have a partner, live off of one person’s salary and save the other person’s. When you invest, make sure you have a diversified portfolio.
  • Automate savings to employer-sponsored 401(k)s and pensions through payroll deductions. If the money’s not in your paycheck, you can’t spend it. If you wait to use what’s left over, you’ll never save.
  • Every time you get a raise, automatically contribute at least half of it to your 401(k) or IRA.
  • Take advantage of cash bonuses when you open a new account with your financial institution.

In addition, another tip is to invest your extra earnings in mutual funds or Exchange Traded Funds (ETFs). These types of investments can lead to higher long-term returns on your money relative to savings accounts and you can easily diversify across stocks and/or bonds to attain a level of investment risk for which you are comfortable. Over time, JP Morgan estimates that a portfolio of 60% stocks and 40% bonds is expected to have a 5.4% annual return. In contrast, most money market funds will earn close to a 0% return on your money right now given how low interest rates are. This could leave you with more money when you retire than your regular savings account at a bank or credit union.

If you don’t have as much saved for retirement as you’d like, look for ways you can cut back on expenses today and use that money to boost your retirement savings. Whether you take the advice of our users or come up with a different plan, it’s important to take steps now to ensure you’ll be financially secure in the future.