By and large, super savers are people who sacrifice spending for the short term to vastly improve their long-term financial position.
They save aggressively: According to a September 2022 study from Principal Financial Group, 59% of survey respondents said they planned to save more than $20,000 toward retirement in 2022. That figure is up from 51% in 2021.
The survey largely attributes this rise in retirement saving activity to the 82% of U.S. savers who believe they can continue to save money through any recession and are willing to make sacrifices in their daily spending to maximize retirement savings.
“Super savers embody some of the best practices for retirement saving that give them the mental and emotional strength to stick with their plans even during times of market uncertainty,” says Sri Reddy, senior vice president of retirement and income solutions at Principal Financial Group.
The key ingredients to their success include discipline, vision, patience and creativity — in approximately equal portions. Develop those traits and you can become a super saver, too.
“These are the folks who go above and beyond the average saver,” says Jonathan Brown, chief executive officer at Dealflow Brokerage in Atlanta. “They’re the ones who show exceptional discipline when it comes to saving, both in small and big ways. They meticulously track their expenses, cut unnecessary costs and prioritize saving over impulsive spending. But it doesn’t stop there.”
When it comes to retirement savings, Brown says super savers kick it up a notch. “They consistently contribute a significant chunk of their income, at least 15% or more, to retirement accounts like 401(k)s or IRAs,” he notes. “They also pay their bills on time and keep their checking accounts in good shape. That’s what sets them apart as true super savers.”
[READ: 10 Strategies to Maximize Your 401(k) Balance.]
How do they run their long-term savings campaigns? Here are 10 things super savers have in common:
1. They set solid financial goals.
2. They automate savings.
3. They prioritize saving.
4. They maximize employer retirement plan contributions.
5. They increase retirement plan contributions.
6. They get creative with savings.
7. They claim retirement savings tax breaks.
8. They pay down debt.
9. They keep expense ratios low.
10. They avoid fees.
1. They Set Solid Financial Goals.
Super savers are milestone mavens who set clear financial goals.
“Specifically, they make them SMART goals, as in specific, measurable, achievable, relevant and time-bound,” Brown says.
A saver using this strategy prioritizes saving by treating it as a fixed expense, not an afterthought, and creates an emergency fund to cover unexpected expenses and avoid high-interest debt.
“Super savers minimize debt altogether, folks — that’s a big deal,” Brown says. “They pause before making nonessential purchases and think about how they impact your long-term savings goals.”
2. They Automate Savings.
Super savers are savvy enough to leverage technology to schedule and expedite their long-term savings.
“At first I didn’t believe I could afford to max out my Thrift Savings Plan,” which is similar to 401(k) or 403(b), says Walli Miller, founder and financial coach at Financially Thriving, a money management and personal financial coaching company. “I began by increasing my contributions by just 1% every six months and then increasing by 1% once a quarter until I was contributing the maximum allowed.”
3. They Prioritize Saving.
Miller, who says she was an over-spender in her 20s and is now well on her way to becoming “retirement optional” in her 40s, says super savers also know what matters in managing their money.
“Super savers don’t focus on deprivation but instead prioritize those goals and experiences that are most important to them,” she says.
For example, people who live in high-tax states should make contributing to a retirement plan a priority.
“Retirement plans are a fantastic way to save and invest for retirement because of the tax advantages,” she says. “An emphasis on retirement plans is particularly beneficial for those in high-tax states or those in higher tax brackets.”
People who are just starting out in their careers or are lower-income earners should “start with accounts that offer tax-free growth like a Roth IRA,” Miller says.
4. They Maximize Employer Contributions.
If an employer offers a matching contribution to a retirement account, individuals should strive to contribute at least enough to receive the maximum match.
“This essentially provides free money towards retirement savings,” says Derek DiManno, a founder and financial advisor at Flagship Asset Services in Towson, Maryland.
[READ: How Much Should You Contribute to a 401(k)?]
5. They Increase Retirement Plan Contributions.
Whenever possible, super savers increase the amount they contribute to retirement savings.
“This can be done when receiving a raise or whenever there’s a decrease in expenses,” DiManno says. “Gradual increases help to adjust to higher savings rates without feeling a significant impact on the current lifestyle.”
6. They Get Creative With Savings.
Super savers go where other financial consumers fear to tread and won’t back down from any opportunity to save.
“Any time a super saver gets a raise or bonus, he or she puts it towards their retirement account,” says Andrea Woroch, money-saving expert at AndreaWoroch.com.
Everyday savers should adopt the same tactic, Woroch says, adding: “You’re already used to living on what you make so you won’t miss it.”
Super savers also look for creative ways to reduce monthly spending and put the money saved on bills toward retirement.
“This could include negotiating rates on your cable plan, cutting unused subscription services and lowering your data costs by switching to an online-only wireless carrier,” Woroch notes. “Also, increasing your insurance deductible can also reduce your premium up to 20% without sacrificing coverage.”
7. They Claim Retirement Saving Tax Breaks.
Super savers take advantage of valuable tax deductions and credits. Retirement savers can defer paying income tax on funds deposited in a traditional 401(k) and IRA, which can be especially beneficial for higher earners who are currently paying a high tax rate.
Lower-income savers might consider an after-tax Roth account, which locks in your current tax rate and allows you to qualify for tax-free investment growth and tax-free withdrawals in retirement. Low-income retirement savers who contribute to a 401(k) or IRA can also qualify for the saver’s tax credit, which can further reduce their tax bill.
8. They Pay Down Debt.
One cornerstone of the super saver experience is avoiding debt — especially credit card debt.
“If you’re carrying a balance on your credit card, think about how much of your money is going to interest that could be going to retirement savings,” Woroch says. To pay down debt faster and save more on interest and other fees, she recommends a balance transfer card.
[READ: How Much Money to Have Saved for Retirement by Age 40]
9. They Keep Expense Ratios Low.
An expense ratio is the cost of owning a fund, and a high expense ratio means a larger portion of your return goes into someone else’s pocket instead of growing your nest egg.
DiManno advises paying close attention to the fees associated with retirement accounts and investment options.
“Choose low-cost index funds or exchange-traded funds that offer broad market exposure and have historically performed well,” he says.
Your 401(k) plan is required to send you a fee disclosure statement each year, which explains the expense ratio and other costs of each fund in the plan. Like successful super savers, select funds with reasonable fees and consider moving your money out of those high-cost funds to help your money grow faster.
10. They Avoid Fees.
Retirement and investment accounts often charge fees for trades, early withdrawals, failing to take withdrawals correctly and other actions you might take.
Most retirement accounts charge a 10% early withdrawal penalty if you take distributions before a specific age, but there are also exceptions to the penalty if you use the money for specific purposes. There is also usually a 50% penalty if you fail to take required minimum distributions from retirement accounts after age 72. Take a cue from retirement super savers and learn the rules so you can avoid fees and penalties.
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10 Secrets of Retirement Super Savers’ originally appeared on usnews.com
Update 06/15/23: This story was previously published at an earlier date and has been updated with new information.
