Saving more for retirement is as simple as 1-2-3 (percent)

Chapter 42: Saving more for retirement is as simple as 1-2-3 (percent)

One percent may not seem like a lot, but saving just one percent of your income can make a big difference when it comes time to retire. Double it to two percent, and your retirement lifestyle is enhanced significantly. Three percent is a game changer.

Believe it or not: Saving a single percent of your income is a goal that’s not impossible — or even all that difficult — to achieve.

The retirement saving gap

According to the U.S. Census Bureau, the typical American approaching retirement has a net worth of just over $45,000. Social Security pays an average monthly benefit of just under $1,300. That doesn’t leave the average retiree much to live on, especially since many these days are paying off mortgages and credit card debt.

If you’re like most people, you probably don’t have a lot saved for retirement, and it’s not your fault. After all, you’ve probably spent a lifetime raising children, contributing to college costs, spending money on home improvements and paying transportation expenses.

However, it’s not too late to turn things around.

That’s where the 1-2-3 (percent) concept comes in.

How 1-2-3 works

Let’s say you’re age 50 and have a household income of $60,000. If you save one percent of it in a tax-free retirement account such as a 401(k), you set aside $600 in the first year. Now let’s assume you receive a three percent annual salary increase, continue to save one percent of your income per year and earn six percent each year on your savings. If you retire at age 70, that will give you almost $33,000 in additional savings.

That’s a nice nest egg that can make a significant difference in retirement. Double the savings to two percent, and it ups your total retirement savings by $66,000. Take it up to three percent, and you’ll have an additional $100,000 in your pocket when you retire.

How you can save 1-2-3 percent more

You might find it surprising, but saving an extra 1-2-3 percent a year isn’t difficult.

Going back to our original example, buying ten fewer $5.00 lattes per month will generate an additional $600 a year — or the equivalent of one percent of your income in savings. Cutting twenty lattes (your weekday coffee supply) takes your savings up to two percent. Eliminating your morning or afternoon cup of joe every day will increase the amount you’re saving to three percent.

Remember, over time, that could provide almost $100,000 for retirement. Does your daily latte still seem so important?

Another option to consider: Once you become an empty-nester, would it be possible to eliminate a single vehicle from your life? Even if you’re not making payments on the car or SUV, cutting maintenance costs will help you save approximately one percent of your salary per year. Eliminating the fuel costs could take it up to two percent. Add-in insurance payments, and you’re easily saving at least the equivalent of three percent of your salary per year. All for giving up a vehicle that will likely sit in your garage.

Here’s another saving option. Do you have kids who’ve finished school? Putting the money that you used to spend on textbooks and school supplies toward retirement will get you to at least the one percent savings level. Putting some of the money you contributed toward tuition into retirement savings gets you two percent. Dorm or housing dollars? Saving those in your 401(k) easily gets you to three percent or more.

Can you see how easy it is to increase your retirement savings in increments of 1-2-3 percent?

By the way, combining the coffee, car and college ideas outlined above will help you save nine percent of your income per year. THAT could get you an additional $300,000 for retirement over the long term.

More opportunities

Looking for additional ways to increase the amount of money you can spend in retirement? Saving more isn’t the only way. You can also earn money. Many people hold down part-time jobs. It’s a great way to make up for a retirement income gap.

One of the easiest ways to work part time in retirement is to start an online business. This lets you work when and how often you want without ever leaving home. Plus, you can continue running the business long into retirement because there are few health or physical constraints associated with working online. Getting started is easy. What are you waiting for? Learn more today!

 

If you liked this article, then you might also like these:

Use your experience to work part time and earn a lot

Is it Costing You Too Much to Save for Retirement?

Please follow and like us:
RSS20
Follow by Email
Facebook
Google+20
Google+
Twitter3K
YouTube20
Pinterest2
Pinterest
LinkedIn20
Instagram20
SNAPCHAT
SKYPE
FLICKR
REDDIT
TUMBLR