5 Easy Tips for Bulking Up Your Retirement Savings
It can be hard to put money toward your retirement each month. A lot of what you make goes toward your expenses, placing your retirement account on the bottom of your priority list. Fortunately, there are easy ways for you to reduce your spending. The trick is to take the money you’ve saved and place it directly into your retirement account before you can spend it on anything else. By finding a few unexpected places to cut back, you’ll be surprised at how much you can actually put away. Ready to amp up your retirement savings? Try these five surprisingly easy tips.
1. Keep a car for a minimum of 10 years
Not what you thought the first tip was going to be, right? But it’s a good one to follow. If you need to have a car, plan on driving it for at least 10 years, according to U.S. News & World Report. Over your lifetime, that will equate to purchasing half as many cars as someone who purchases a new car every five years. It equates to a lot of savings that can be put toward your retirement. How much, exactly?
U.S. News & World Report says that in the book Deal With Your Debt, author Liz Weston discovered that by driving a car five years longer than a typical car loan, you could save $250,000 over a lifetime. If you take that a step further and invest the savings with an 8 percent return rate, you could easily find yourself with a savings of around $2.5 million. Bet your old car isn’t sounding nearly as bad as it was before.
2. Use a rewards card to contribute to your retirement savings
Credit cars usually offer points that can be redeemed for many different things, including airline tickets, hotel rooms, gas, and merchandise. If you can apply it toward all of those things, why not use to it to help boost your retirement savings? That doesn’t mean you need to change your spending behavior – by using the points you accumulate toward everyday items, you can start racking up rewards that can be applied to your retirement, per Fidelity.
As always, make sure you’re paying off your credit card balances each month, otherwise the interest rate could be depleting the money that you’re building up through rewards. “But if you’re diligent about paying off your credit cards, a $50 monthly cash reward deposited directly into your retirement account could grow to $26,000 in 20 years at a hypothetical compound annual growth rate of 7%,” said Fidelity. Look for cards that offer cash back that can be directly deposited into a cash management account — it will make it really easy for you to set that money aside.
3. Say goodbye to cable
There’s no way around it: Cable is expensive. You could easily find yourself spending $100 or more on your cable bill each month, which is silly when you consider there are plenty of alternatives out there, per MSN Money. Look into Netflix, Hulu, Amazon Prime, or Redbox, which all allow you to save money toward your retirement each month without missing out on the shows and movies that you can’t live without. Keep in mind that many networks also offer streaming options after the show has aired. There’s really no need to pay cable companies your hard-earned cash, especially when saving at least $50 per month can put you on the path toward more retirement funds.
4. Vacation during the off-season
You don’t even have to give up vacationing. Instead, just be smart about picking your vacation times. Bloomberg Businessweek reports that financial planner Frank Boucher opted to take a beach vacation in early September when he found a luxury condo for half the price compared to July and August. Take the other half of what you would have spent on your vacation condo and put it toward your retirement.
You can also save money by staying with friends or taking a trip to a developing country, which typically tends to be cheaper. And if you can’t vacation during the off-season, The Huffington Post recommends to “plan ahead and make major vacation purchases a few months in advance. Buying tickets for a summer vacations six months prior as opposed to a week before can save you hundreds of dollars in the long run.”
5. Switch up your cellphone
You have two options here. The first, get an all-inclusive cellphone plan, per MSN Money. You could be paying $100 or more per month for your cellphone. Rather than continue to wave goodbye to that money each month, consider taking a look at providers such as MetroPCS, which offers plans starting as low as $40 per month. You’ll still get unlimited talk, text, and Internet — you just won’t get charged for usage overages. Expect to save about $60 a month, or $720 a year, which can then sit in your retirement account, accruing interest.
U.S. News & World Report suggests considering a prepaid cellphone. Cellphone plans start as low as $5 per month, and data plans can be as low as $25 per month. “So what does this have to do with retirement? Saving $55 a month by paying $25 monthly for your cellphone instead of $80 may not seem like a lot. However, over 40 years of working that small savings adds up to $144,000 if invested at a 7 percent return,” according to U.S. News & World Report.
More From Wall St. Cheat Sheet: