June 25, 2020

Edited 07/14/20

Small Changes You Can Make to Grow Your Retirement Fund

Create distance from your retirement accounts. Instead focus on the small savings that have a big impact.

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When a crisis strikes or the stock market loses its stability, your financial picture may change and you might find yourself keeping a close eye on the markets and your bank accounts. You may even find it tempting to dip into your savings. But the reality is, the time period after a crisis represents a favorable time to implement changes that can help improve your path to retirement security. Here are three small changes you can easily make that will have a large impact on your retirement fund.

1. Re-evaluate Your Spending

Many of us have seen our discretionary spending reduced while we work and live from home. In a recent Silvur conducted survey, we discovered 47.7% of Baby Boomers reduced their spending by over $125 a month. You may be wondering how they cut back and saved so much? The survey shows that they saved by cooking at home, reducing travel, and streaming TV shows rather than paying for cable. 

With the increase in savings, most Americans are now eliminating or reducing their non-essential spending as a permanent part of their life and budget. By re-evaluating your current spending habits, you can easily save a few hundred a month and allocate your savings into your retirement fund. 

Here are a few ways to help you start saving:

Online Gym Classes vs. a Gym Membership:  

During quarantine, you may have tuned into online fitness classes instead of going to the gym to stay active. Not only is it readily accessible and keeps you healthy, but it will also decrease your monthly spending. This saving habit is something you’ll want to make sure it sticks because online or fitness streaming apps are less expensive than boutique fitness studios or gyms.

For example, Yoga International offers monthly subscriptions for $19.99 a month, which is roughly the same price as a single class at your local studio. Platforms like Mirror offer memberships for $39 a month for access to a variety of yoga, pilates, strength, and boxing classes. While taking workout classes with friends can be fun, online platforms offer both a lower cost and safer alternative for staying healthy (plus, you can invite your friend and split the costs).

Home Hair Dye vs. a Professional Salon:

A month into quarantine, many have been experimenting and perfecting their at-home haircuts and dyes. While professionals certainly make a difference, it can add a dent into your monthly expenses when you have to pay for the service and gratuity. It’s evident that dying or cutting your own hair will improve your monthly savings.

Before you make your next appointment to touch up your roots or trim your hair, think about alternative solutions that you can do. For example, rather than paying $100 or more at the salon, home hair dye kits are reasonably priced at $22 a month and are gradually becoming more popular.

Alternatively, see if your partner or friends can cut your hair for you now that they’ve had the practice during quarantine. In addition, there are several online resources, such as YouTube videos, that can teach you how to color your own roots or give yourself a haircut at home.

Live Sports vs Streaming:  

In 2018, Americans spent $56 billion on live sporting events according to a poll conducted by creditcards.com. In addition, researchers at UC Berkeley estimate the minimum cost of attending an NFL game to be $100 after tickets, parking and concessions. 

With live sporting events on hold this year, and the growing popularity of streaming, this transition is one you should consider. With streaming, not only can you access a wider range of sports, but platforms such as ESPN+ only cost $4.99 a month. Transitioning into streaming will minimize costs that yield additional savings towards your retirement fund.

Future saving calculations: Online or DIY activities are generally lower cost than ‘in-person’ activities, helping us to reduce our discretionary spending in the near term. Saving $125 a month will grow to almost $50,000 over 20 years, and saving $250 a month will grow to almost $100,000 over 20 years. 

2. Add Part-Time Income

The days of retiring at 62 and never working again are long gone—but not the way you think. Today, soon-to-be retirees are embracing working part-time because it provides extra cash, and also a feeling of purpose in retirement. Not only is it good for the wallet, but also for the mind.

Before COVID, many retirees were generating part-time income by renting out real estate. While this may not be possible in the very near term, a number of other part-time income opportunities have emerged, such as e-health, online learning, or customer services roles. If you take advantage of part-time income, you should calculate how your additional income can impact your taxes and benefits and plan around it.

Future saving calculations: The increase in part-time work through platforms such as Outschool and K Health has given boomers an opportunity for increased flexibility and retirement income for their emergency fund. By earning $2,000 of part-time income from age 62 to 70, you can add approximately $215,000 to your retirement fund.

3. Refinance Your Home  

If you bought a home more than a year ago, it’s worth checking your rates to see if you could benefit from refinancing your mortgage. Refinancing is the process of paying off your existing mortgage, which has a higher rate, and borrowing a new mortgage at a lower rate. 

Refinancing allows you to either:

  1. Extend the term of your mortgage,
  2. Reduce your monthly payments, and/or 
  3. Extract some cash from home equity which may have built up in your home value. 

The savings for individuals are material—both in the short term and the long term.  

Keep in mind that the average closing costs for refinancing a mortgage can range between 2-6%. You can often roll this into your loan, but be sure to negotiate the fees.  For example, ask for an appraisal waiver, and if you work with the same title company as your original mortgage, ask for the reissue rate.

Also, don’t forget to shop for your rate. Every situation is different, but Freddie Mac’s research suggests that consumers could save an average of $1,500 over the life of the loan by getting one additional rate quote and an average of about $3,000 for five quotes. Silvur’s Marketplace helps you shop and compare mortgage rates so your savings stay with you in retirement, and not with your lender.

Future saving calculations:  Mortgage rates are at all time lows.  Even if you’ve locked in rates a year ago, there are savings to be made.  For a $500,000 mortgage, refinancing today could save you (compared to a year ago) $284 a month, $3,408 a year, and $102,121 over the life of your mortgage.

These are simple changes that you can do today that yield additional savings for your retirement funds.  See these calculations personalize to your own financials and goals through Silvur. Silvur will project your future income based on these small changes from reducing your expenses, adding part-time income, delaying your retirement and Social Security benefits. Take charge of your future retirement and get Silvur to help guide you through small actions you can take everyday to increase your retirement fund.