How to Increase Savings to Build a Nest Egg for Retirement

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I’ve got a rockin’ guest post for you today from Kathy, the owner of Baby Boomer Super Saver. Kathy’s goal is to share simple, practical steps that will help you increase your retirement nest egg.  When not blogging, she can be found leading herb walks or hunting for gold mushrooms in the woods. I hope you enjoy it as much as I did! ~ Jamie

Whether you are young and just starting out, or a little older with lots of bills and obligations, it can be hard to find the extra money to grow a healthy retirement nest egg.  In this article, I’m going to share how to build a retirement nest egg. 

Age Matters When You’re Saving for Retirement

If you started saving for retirement in your teens or 20s, you’ve got it made in the shade when it comes to growing a retirement nest egg.  Even if you contributed regularly and then stopped later, those early contributions have been blessed with the magical power of compound interest.

But what if you’re 30 or 40 years old and haven’t started saving for retirement yet?  Or what if you are in your 50s or 60s, and you haven’t saved enough?

Whether you are a Millennial, a member of Gen X or Y, or even a Baby Boomer like me, you can take steps to increase your savings for a better retirement.  It’s not too late!

If you’re a Millennial who has not yet started investing in your retirement, start saving now!  Even small, regular contributions to a 401(k) or IRA will add up over time.

Older savers will have to use more aggressive saving strategies and take advantage of catch-up contributions.  It can be a rude awakening to realize there aren’t many years left to work and grow your nest egg.

Save Yourself Some Tears and Learn from my Money Story

Sadly, I did not save enough when I was younger.  I did not contribute to the 401(k) retirement plans at previous jobs when I could have.  I opened a couple of IRA accounts over the years, and cashed them out before they had a chance to grow.  

My husband and I made all the wrong moves with money, but we eventually got our finances under control. We all make mistakes.  It’s important to learn from our mistakes, but equally important not to continually beat ourselves up over them.

Move on.  

Why I Stopped Procrastinating Investing in my Retirement Savings

For most of my professional career, I’ve worked as a social worker.  Currently, I serve seniors and individuals with disabilities, through a program that helps them to remain safely in their own homes.  

Maybe it’s because I’m older more experienced now, but when I go into the home of a low-income senior or someone with a disability and see what a struggle it is just to pay rent and buy food, it scares me.  

This job, more than any other I’ve held, has opened my eyes to what it would be like to be old, sick, and poor.  It’s not what I want for my retirement.

How to Build a Nest Egg for Retirement 

Save more money NOW.

No matter where you are in your effort to save for retirement, it’s never too late to do more.  Haven’t started saving for retirement yet?  Don’t feel like you’ve saved enough?  

Now is the best time to start growing a bigger retirement nest egg, regardless of your current age.  

The best time to plant a tree was 20 years ago.  The second-best time is now.  -Ancient Chinese Proverb

My Interview with a Financial Advisor

It’s easy to think there will always be time to save for retirement later, but there is no guarantee that we will be able to keep working and earning an income.  

I’ve seen estimates that 46% – 60% of current retirees have had to leave their jobs before they planned due to illness, disability, job loss, or needing to stay home to care for a loved one.

I turned to a financial advisor to learn more.

According to financial advisor Steve Bossio of Magnum Financial in Sonoma, CA, “People are pushed out of the job market all the time, with too little in the bank and too long to go before they reach the age when Social Security kicks in.”  

Bossio added “It’s one thing to be unemployed and able, you can drive for Uber.  But what if you get sick and can’t get back into the job market?  I’ve talked with contractors who can’t continue to physically do their work.”   

Planning for the unexpected and upgrading your skills is key.  Bossio advises clients to look for opportunities and ways to diversify.  “If you assume your income stream may end, you will constantly seek opportunities.  Keep your eyes open.”

This hit me with shocking clarity when my husband almost died after he had a ruptured brain aneurysm, at the relatively youthful age of 55.  Thankfully, he survived, but he’s permanently disabled and can no longer work.

That left me in the position of figuring out how to make and save more money for our retirement nest egg.  I had already been in the process of getting additional training and certification for a side job, which saved us when my previous social work job was downsized.      

10 Powerful Ways to Increase Your Retirement Savings

I have learned how to think outside the box when it comes to catching up retirement savings, using both big and small strategies.  Most of the following tips can be used by anyone, but there’s a few retirement savings super-chargers for people over 50 years old.   

1. Write Down Your Goals

A goal is just a dream until it’s written down.  Brain research has shown that writing down information helps us remember it.  A goal that we remember is one we will implement.  

What do you want to do in retirement?  Write down your retirement goals to determine how much money you will need to save.  

2. Find Your “WHY” and Use Visualization and Affirmations

It can be a struggle to meet retirement savings goals when constantly bombarded by messages to spend money.  Having a “why” can help you successfully reach your retirement goals by increasing your focus on them.  

My why: I’m saving so my husband and I can travel during retirement.      

Visualization dramatically increases motivation, and it also activates the subconscious brain to recognize opportunities that will help you reach your goals.  Imagine in precise detail what it would look like to have achieved your goals.

Create an affirmation to go with your visualization, to reinforce how it would feel to have achieved your goal.  Write out a simple statement about your feelings on having already achieved that goal.

Visualization:  I’m lying on a warm beach, squishing the soft sand between my toes as I relax to the sounds and smells of the pounding surf.  My passport is filled with colorful stamps from around the world.

Affirmation:  I’m so happy and excited now that my husband and I have purchased one-way, round the world flight tickets for retirement. It’s the best way to travel!

Take a few moments every morning and every evening to read your goals, visualize having achieved them, and repeat your affirmations.  

3. Get Rid of Debt

If you have debt, do everything you can to get rid of it.  The borrower is slave to the lender, and you’ll never be able to catch up retirement savings if you are burdened by debt.  

Paying off debt frees up more money that can be used to boost your retirement savings.  

Do you really want to work just to help credit card companies get richer?  Pay yourself instead of someone else!

4. Change Your Habits

It takes 21 days to change a habit.  Make it a challenge to see how much money you can save in 21 days by making your own coffee, not going out to eat, visiting the library instead of the book store, etc.  

Challenge yourself to a “no spend” month and use up what you have.  You’ll be training your brain to delay gratification.

Add up your savings and put the money in your IRA.

5. Create a Wealth Snowball

I developed this idea after using Dave Ramsey’s debt snowball to pay down debt.  If you’re behind in saving for retirement and want to catch up, the same principles of the debt snowball apply to a wealth snowball:  

Cut spending, sell things, get a side job, and throw all the money you can at your retirement savings.  We do not have cable TV and I drive an old, paid for car.  I have a few side hustles, including a second job.

Although you’re limited to how much you can contribute to IRA and 401(k) accounts each year, once you max those out, you can still grow your retirement nest egg through taxable investment accounts.  

The same excitement of paying off a final debt using the debt snowball method can be attained by reaching your savings goals with a wealth snowball.  What’s even better is that the bigger your wealth snowball becomes, the faster it grows.  

Your investment accounts begin generating more and more passive income through compound interest, until you reach the point that you can live off your investments.       

6. Find a Mentor or Two

Do you know someone who is successful with money?  Spend time with them and learn to do what they do.  

Don’t know anyone like this?  Read personal finance books and listen to podcasts.  

My favorite personal finance books include Your Money or Your Life by Vicki Robin & Joe Dominguez, The Simple Path to Wealth by JL Collins, and The Millionaire Next Door by Thomas Stanley.  

I listen to the Dave Ramsey show for reinforcement to avoid debt.  During my daily walk, I listen to the Chose FI podcast for inspiration and guidance on reaching financial independence.  

7. Take Advantage of Tax Advantaged Accounts.

I waited way too long in my career to start doing this.  I finally began contributing to a 401(k) plan a few years ago with a tiny contribution that I didn’t even miss – only $20 a month.  With each raise, I increased my contribution.   

If you have access to a 401(k), 403(b), or 457 plan at work, enroll and start saving for retirement.  Money is deducted from your paycheck and invested with pre-tax dollars, up to $18,500 in 2018.  

You may also be able to invest in a traditional IRA or ROTH IRA, up to $5,500 with pre- or post-tax dollars.  Your spouse can contribute to an IRA, too.  If your spouse is not employed, you can contribute to a spousal IRA.

Retirement Savings Super-Chargers if You’re 50 or Older:  

• 401(k) contribution limits are higher if you are 50 or older, $24,500 in 2018.
• IRA contribution limits are also higher if you’re 50 or older, $6,500.
• There’s a special 457(b) deferred compensation plan catch-up provision for public employees.  If you’re 50 or over and haven’t previously maxed out contributions, you may be able to contribute up to $37,000 per year in the 3 years before you reach your normal retirement age.

I’m taking advantage of this 457(b) deferred comp catch-up right now, and the wealth snowball strategy really helped us afford to have so much of my paycheck deferred.  

The 457(b) deferred comp catch-up provision also reduces my income enough that I can still contribute to an IRA and spousal IRA!  

Additional tax advantaged accounts to consider include the Health Savings Account (HSA) or the Flexible Spending Account (FSA).  Check to see what options are available with your employer.  

HSAs often allow unused funds to grow, while FSAs are a yearly use-it-or-lose-it proposition.  

Both let you pay for out-of-pocket medical expenses with pre-tax dollars, which can save you quite a bit of cash.  The Dependent Care Assistance Plan also lets you pay for dependent care expenses with pre-tax dollars.  

Calculate how much you will save by using a HSA, FSA or Dependent Care Assistance Plan. You just found more money to contribute to your IRA or taxable retirement account!   

8. Automate

401(k) and IRA contributions are voluntary, so be sure to enroll at your job.  The money comes out of your paycheck before you ever see it, so you won’t miss it.  Automation means you won’t have to worry about contributing to your retirement savings – it will get done for you.

You can also set up your post-tax investing accounts on auto pilot, so that the money is deducted every month from your checking account.  

This allows you to benefit from dollar cost averaging – you invest the same amount over time, regardless of the ups and downs of the market.  You don’t have to time the market, which is impossible anyway.

Automation can help you save on monthly expenses, too.  Some creditors include a discount for automated billing.  Don’t waste money on late fees due to forgetting to pay a bill.  Sign up for auto pay for all your regular bills like utilities, insurance, garbage, phone, etc.

9. Find Free Money

Not everyone has access to a 401(k) plan at work, and even less have the option of an employer match.  (My employer doesn’t offer a match).  If your company does offer a match, be sure to at least contribute enough to your 401(k) to get the match.  It’s free money!  

Are you planning to change jobs?  Find a job that offers an employer match for 401(k) contributions, and/or offers a pension.  Pensions are becoming rare, but they are still available for some jobs.  

My current social work position is with a county government, and it’s the first job I’ve held that has offered a pension.  Make sure to stay in any job that offers a pension long enough to get vested, or you’ll get nada!  

Other free money – if you plan to make certain purchases anyway, look for ways to save money by buying online and getting free shipping.  You’ll save time and gas money.  

Take a few minutes before each purchase to look for a coupon code or online shopping tool that will either save you money or pay you a percentage of your purchase back in cash.

My favorite online shopping tool is Ebates, and I love getting my Big Fat Checks!  I add this free money right into my retirement savings.

10. Eliminate Fees

The most important fees to pay attention to are the fees charged within your 401(k), IRA, or other investments.  These fees can significantly eat into your retirement savings over time, shrinking your next egg from it’s full potential.  Look for funds with lower fees, such as low-cost index funds.

Do what you can to get rid of recurring fees from your monthly budget.  This will free up more money to invest.  By signing up for online banking, you eliminate monthly bank charges.  Pay for your car insurance every six months instead of monthly, and you cut “convenience fees” that just make car insurance more expensive.  

My Final Thoughts

Although age does make a difference when you start saving for retirement, your fate is not set in stone when it comes to growing a larger nest egg.  It’s never too late to save more.  

Although you don’t have control over whether your company is downsized, or whether you become disabled, you do have control over your behavior.  

Choose to engage in behaviors that will help you successfully reach your retirement goals.  Look for ways to develop multiple income streams and save more money.  You will find them.  

Let Me Know in the Comments

Hopefully, the tips and strategies I’ve presented are useful.  I’d love to hear your ideas – what else can you think of doing to grow a larger retirement nest egg?

Please share your thoughts, thank you!

Our budget and goals changed our lives and it can change yours too.

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