Super savers typically make short-term sacrifices to their expenditures in order to significantly strengthen their financial situation over the long run.
They are aggressive savers: 59% of poll respondents stated they planned to save more than $20,000 for retirement in 2022, according to a September 2022 report from Principal Financial Group. This number increased from 51% in 2021.
The 82% of American savers who feel they can continue to save money during any recession and are prepared to make sacrifices in their everyday expenditures to maximise future savings are largely responsible for this increase in retirement saving activity, according to the survey.
“Super savers embody some of the best practises for retirement saving that give them the mental and emotional strength to stick with their plans even during times of market uncertainty,” claims Sri Reddy, senior vice president of retirement and income solutions at Principal Financial Group.
They have almost equal amounts of discipline, vision, patience, and creativity, which are the main building blocks of their success. If you acquire such qualities, you can also become a super saver.
Jonathan Brown, CEO of Atlanta’s Dealflow Brokerage, claims that “these are the people who go above and beyond the average saver.” They are the ones who exhibit extraordinary restraint when it comes to making both modest and significant financial sacrifices. They keep thorough records of their expenditures, eliminate wasteful expenses, and put saving ahead of irrational spending. But it goes further than that.
Super savers boost the ante when it comes to retirement savings, according to Brown. He observes that “they consistently put a sizeable portion of their income—at least 15% or more—into retirement accounts like 401(k)s or IRAs.” “They also maintain clean checking accounts and pay their payments on time. That distinguishes them as genuine super savers.
How are their campaigns for long-term savings run? Here are 10 characteristics of exceptional savers:
- They make wise financial plans.
- They streamline saving.
- They give saving priority.
- They maximise contributions made by employers to retirement plans.
- They raise contributions to retirement plans.
- They find innovative ways to save.
- They assert tax benefits for retirement savings.
- They reduce debt.
- They maintain minimal expense ratios.
- Fees are avoided.
They make wise financial plans
“Specifically, they make them SMART goals, as in specific, measurable, achievable, relevant, and time-bound,” explains Brown.
By seeing saving as a fixed expense rather as an afterthought, a saver who employs this technique gives saving top priority. They also build an emergency reserve to handle unforeseen needs and keep away from high-interest loans.
Brown asserts that “super savers minimise debt entirely, folks—that’s a big deal.” “They take a moment before making unnecessary purchases and consider how they will affect your long-term saving objectives.”
They streamline saving
Super savers are tech-savvy enough to plan and hasten their long-term savings using technology.
According to Walli Miller, the founder and financial coach at Financially Thriving, a business that offers money management and personal financial counselling, “At first I didn’t believe I could afford to max out my Thrift Savings Plan,” which is comparable to a 401(k) or 403(b). I started by only increasing my donations by 1% every six months, then by 1% once every three months, up until I was putting in the maximum amount.
They give saving priority
Super savers also understand what matters when it comes to managing their money, according to Miller, who claims she was an excessive spender in her 20s and is now well on her way to becoming “retirement optional” in her 40s.
“Super savers don’t focus on deprivation but instead prioritise those goals and experiences that are most important to them,” she claims.
For instance, residents of states with high taxes ought to prioritise retirement plan contributions.
The tax benefits of retirement plans make them a great option to invest in and save for retirement, according to her. A focus on retirement plans is especially advantageous for people who live in high-tax states or who pay higher tax rates.
Beginning workers or those with lower incomes should “start with accounts that offer tax-free growth, like a Roth IRA,” advises Miller.
They maximise contributions made by employers to retirement plans
Individuals should aim to make at least the minimum contribution necessary to receive the maximum match if their employer provides a matching contribution to a retirement account.
“This essentially provides free money towards retirement savings,” claims Derek DiManno, founder and financial advisor at Flagship Asset Services in Towson, Maryland.
They raise contributions to retirement plans
Super savers raise their retirement savings contributions whenever they can.
DiManno advises that you can do this everytime your expenses go down or you get a rise. Gradual increases enable people to acclimatise to greater savings rates without experiencing a material change in their standard of living.
They find innovative ways to save
Super savers will not back down from any opportunity to save and will venture where other financial consumers hesitate to go.
According to Andrea Woroch, a financial expert at AndreaWoroch.com, “a super saver always puts it towards their retirement account” if they receive a raise or bonus.
The same strategy should be followed by everyday savers, according to Woroch, who adds: “You’re already used to living on what you make so you won’t miss it.”
“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,” says Woroch. Increasing your insurance deductible can also lower your cost by up to 20% without compromising coverage, according to the author.
They assert tax benefits for retirement savings
Supersavers take advantage of beneficial tax advantages and deductions. Saving for retirement allows investors to postpone paying income tax on money placed in traditional 401(k) and IRA accounts. This is advantageous for higher incomes who are now subject to high tax rates.
An after-tax Roth account, which locks in your current tax rate and qualifies you for tax-free investment growth and tax-free withdrawals in retirement, may be an option for lower-income savers. Low-income individuals who make 401(k) or IRA contributions may also be eligible for the saver’s tax credit, which can further lower their tax obligation.
They reduce debt
Avoiding debt, especially credit card debt, is a key component of the super saver experience.
If you have a credit card balance, consider how much of your money is going to interest instead of retirement savings, advises Woroch. She advises using a balance transfer credit card to pay off debt more quickly and save money on interest and other costs.
They maintain minimal expense ratios
The cost of owning a fund is its expense ratio, and a high expense ratio suggests that a bigger portion of your return goes to enriching the pockets of others rather than building your nest egg.
DiManno suggests paying special attention to the costs related to investment options and retirement funds.
Select inexpensive index funds or exchange-traded funds that provide wide market exposure and have a strong track record, he advises.
Every year, your 401(k) plan must send you a fee disclosure statement that details the expense ratio and other fees associated with each fund in the plan. Choose investments with acceptable fees, and think about removing money from high-cost investments to help your money grow more quickly, just like the successful super savers.
Fees are avoided
Investment and retirement accounts frequently impose fees for transactions, early withdrawals, improper withdrawals, and other potential actions you might take.
There are some exceptions to the early withdrawal penalty if you spend the money for certain objectives. The majority of retirement plans have an early withdrawal penalty of 10% if distributions are taken before a specific age. If you do not take the required minimum distributions from your retirement accounts beyond the age of 72, you will often be subject to a 50% penalty. Learn the rules so you can avoid fees and fines by taking a cue from retirement super savers.