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We are often told that it is important to save for retirement, but it is difficult to do better than others when the immediate expenses of life continue to face us. But if you are serious about getting into retirement savings, here is a new tactic that could help you: imagine yourself during your golden years.
In fact, people who are able to consider their 60s, 70s and beyond feel compelled to save much more in a retirement plan than those who do not evoke the same images. This data comes from Capital Group, which has conducted an experiment to understand what motivates workers to save for the future. Half of the people recruited for his study were asked to consider their life in retirement, while he was simply asked the other half how much he thought he should save. The result? Those who were able to create a real picture of their retirement thought that they should save 31% more per salary than those who did not consider retirement at all.
SOURCE OF IMAGE: GETTY IMAGES.
Of course, it's one thing to feel the pulse to save more, but it's another thing to have the means to do it. If you are inspired to increase your savings, here are some tips to get there.
1. Reduce an expense every three months
You will often hear that if you really want to do more with your savings (retirement or other), you will have to get into a big frenzy. But let's face it: Depriving yourself of every luxury you enjoy is not a way of life, and it's not particularly practical.
A better solution? Try to reduce one expense of your budget every three months and put the difference in your retirement plan. This could mean ordering fewer takeaways, canceling a magazine subscription or reducing your mobile data plan. These are the details that interest you, but the idea is to make modest changes that you are able to maintain rather than make radical changes that you will eventually reverse when you realize how much they are negatively impacting your quality of life.
In fact, suppose you are able to reduce your expenses gradually so that one year from now, you have the option of injecting $ 100 more per month into your IRA or 401 (k). Suppose also that when this happens, you are 40 years old. If you invested this money with an average annual return of 7% (which is a few percentage points less than the stock market average), you would have an additional $ 113,000 by your 70th birthday.
2. Get a secondary job
Many people who do a second job do so because their salary does not allow them to make ends meet. That said, of the millions of Americans currently facing a crush, 14% are doing this extra work for the sole purpose of saving for retirement.
Imagine that you can earn $ 15 an hour and work an extra eight hours a week. Over the course of a year, you will have earned about $ 6,000 more, and this money can directly be used to save money. (Do not forget that if you are under 50 and save in an IRA, you will only have the option of paying $ 5,500 of that $ 6,000. However, if you have a 401 (k) by work, you can contribute up to $ 6,000 and then some.)
3. Bet your bonuses and raises
During your career, you will be able to make up the happy extra cash recipient, usually in the form of a bonus or an increase. And if you want to save that money for retirement rather than spend it, you'll increase your nest egg without really missing it.
Imagine you get a $ 3,000 bonus this year and put it all in your 401 (k). Even if you do nothing more and just let it grow at 7% per year for the next 30 years, you'll have $ 23,000 more to work at the end of the day.
It is difficult to save for things that look good in theory but do not really mean anything to us in practice. If you're lacking motivation for retirement savings, try to imagine what it might be like to travel the world, do some interesting things and enjoy the freedom of money you can spend at one time where your schedule is not restricted. And then, do what you need to do to make that dream come true.
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