Use These Tips to Save for Retirement

Dollar symbol and stack of coins in concept of saving for retirement.

(Image: Tanu2534 via Dreamstime)

Saving for a comfortable retirement can seem like rocket science. However, with the right savings and investment strategy, it definitely isn’t impossible.

How many people over 30 seriously consider how their retirement will look financially? It seems like it would be easier to put it off than to think it through. But looking at some suggestions on the web, and listening to financial experts, saving up enough money to live comfortably after retirement is not unreachable.

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The following is a rough outline of what could help you save up a large sum of money for retirement.

Don’t spend unnecessary money

For some, this is the most difficult virtue of saving to master. In this day and age, spending and consumption are not mere necessities for survival, but they are also ways to beat boredom, be part of social activities, and they are a type of lifestyle for many.

Saving money seems equal to being poor in the minds of many who dread the thought of cutting back on those daily coffees, snacks, fast foods, and weekly entertainment.

Bearded young man in blue casual style shirt standing and showing his empty pockets and looking at camera, standing indoors, in front of a pink background.
Saving money seems equal to being poor in the minds of many who dread the thought of cutting back on daily expenses. (Image: khosrork via Dreamstime)

However, be assured there are many ways of enjoying life without having to spend more than necessary every day.

“According to a new report from Chase Blueprint®, ‘Born to Spend? How Nature and Nurture Impact Spending and Borrowing Habits,’ a specific section of the human brain lights up when we face a choice, such as, say, spending on something that we know we shouldn’t,” says an article on Forbes.

Just to put a simple type of spending into numbers, let’s take a regular size coffee, such as the “tall” one you get at Starbucks that costs an average of $1.95. If you make yourself a coffee at home and take it to work, and just purchase coffee on the weekend, you would save $81,120 after 40 years.

Woman holding a Starbucks cup with the name 'Julia' and a smiley face written on it.
Cutting out the daily coffee from Starbucks would save you US$81,120 after 40 years. (Image: Karaevgen via Dreamstime)

Adopting a disciplined lifestyle and staying on budget is the key when it comes to spending.

How much does the average smoker spend on cigarettes? If you smoke 3.5 packs per week, with a pack costing about $6 on average, you are looking at an expense of $1,092 per year for cigarettes. Over the next 40 years, you are looking at spending $43,680 on cigarettes.

Add the average cigarette expenses to the average coffee expenses that we established previously, and you reach a total sum of $124,800. That’s more than $100,000 the average person could put toward saving for retirement.

Put money toward retirement plans

Retirement plans can vary in different countries, and they might vary depending on the country’s laws and regulations.

In the United States, you have the option to pay into a 401(k) retirement account. This basically means however much you put into the account each month is how much your employer will put in it too.

A piggybank and stacks of coins on a wooden surface in front of a chalk board with '401k' written on it in white chalk.
In the United States, you have the option to pay into a 401(k) retirement account. (Image: Dwnld777 via Dreamstime)

“If you’re working at a company that offers a 401(k) and they match contributions, you should really save in that plan. It’s a great way to get a really good head start on building your retirement savings,” says Wei-Yin Hu, vice president of financial research at Financial Engines, California, according to U.S.News Money.

If you are self-employed, there are quite a lot of options you can choose from, making it a little bit more difficult to choose which nest you would like to lay your retirement egg in.

According to Hu: “There’s a category of people who are self-employed or own their own businesses, and have more complicated choices to make.”

If you choose to invest your money in funds hoping to receive a nice return over time, you should consider two basics:

  1. The higher the returns, the more risky the investment, in terms of losing a chunk of money when the financial market goes bogus. However, you can make substantially higher returns in less time, if you are lucky.
  2. On the other hand, settling for lower returns will give you more financial safety, but it will also take longer for your money to grow.

Most people who invest in funds pay a financial advisor to take care of the details. If you can’t afford one, don’t worry. You can get a lot of essential information for free from the institutions that hold your money, and sometimes they offer some type of educational program for their investors.

There is also the Individual Retirement Account (IRA), which is basically “a savings account with big tax breaks, making it an ideal way to sock away cash for your retirement,” according to CNN Money. There are several different IRAs to choose from, so make sure you find out more about which one suits you best from an expert.

Compound interest

Using compound interest to save is a way to get the most out of your savings according to financial experts. Compound interest, in a nutshell, means that you earn interest on your original saving amount, plus you earn interest on that interest that accumulates on top of your initial saving over time.

This video by Investopedia from YOU Unlimited Inc illustrates how compound interest works:

Become knowledgeable about tax

There aren’t many people who don’t believe that doing something themselves might save them money. Sometimes, however, it is not a bad idea to take on some expert advice, or just let an expert handle it all together, such as taxes.

Why? Well, while most of us are used to just paying tax or having it being deducted each month, every quarter, or yearly, there are also ways to get a tax refund if you make the effort to file a tax return.

A tax return is basically “a document filed with state or federal authorities that declares a taxpayer’s liability for being taxed, based on their yearly income. If they have been charged too much, the government must refund them, […],” according to WiseGeek.

Turbo Tax shows you 5 Hidden Ways to Boost Your Tax Refund.

Why rent if you can buy?

If you can afford to buy a home, you might take it into consideration as a long-term investment. If you feel like your job is quite secure and you don’t mind living in the same area for a long time, then buying your home might be a reasonable option of investing.

Red cardboard cutout of a house sits on a wooden table beside some stacked coins.
If you can afford to buy a home, you might take it into consideration as a long-term investment. (Image: Tero Vesalainen via Dreamstime)

In the long run, the home you own and its value are all part of the sum of assets you own when you go into retirement.

Health and moral wealth above all

An ancient Greek proverb by Plato says: “The part can never be well unless the whole is well.”

The same is true concerning wealth in relation to health. Health is the foundation of all wealth, and without it, you might find it very difficult to reach any goal, especially at retirement age.

Needless to say, no amount of money can replace health and bliss.

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