My wife and I recently retired. The other day our daughter asked us what she and her husband should be doing to retire comfortably when their time comes around. We had not thought about it in a while but started giving her some strategies we used. As I thought about the conversation at greater length, I realized these strategies could benefit anyone in her situation.

Hack #1: Remember Your Retirement Contributions

The first thing we told her was to contribute as much as they could afford to their IRA and 401k plans, especially since they both have a company match. Generally speaking, starting on your retirement savings as early as possible provides more years to let investments grow. This could position them – and you – for a more comfortable retirement.

Hack #2: Be Smart About Being Aggressive

The second strategy we shared was that they should be more aggressive with their investments at a young age. By adopting a higher risk-reward profile, they will end up with a larger retirement portfolio in the long run and will have plenty of time to recoup losses from stock market dips and bear markets. Over the last 30 years the stock markets have generated average returns of close to 11%.  That is much higher than the average return for certificate of deposits and savings accounts which are more stable.

Hack #3: Taking Advantage of Found Money

Let’s face it: Saving money isn’t exactly fun. Every time you put that money away, your lizard brain says, “Ouch!! Why don’t we buy that fun thing instead?” That’s why, it’s important to come up with a strategy to offset the pain of saving money for long term goals like retirement. It is great when you find a $20 bill in the couch, get some overtime pay, a raise, a bonus, or a tax refund. My wife and I have always called that “Found Money.” You either did not see it coming or you knew it was coming and did not budget it in yet.

Here is the simple hack: Make an ironclad rule that whenever you come across found money, you put at least half toward paying down debt, building an emergency fund or increasing your long-term savings. Then take the rest of it and appease your lizard brain. Put the other half towards fun stuff like a fund for taking a cruise next winter or a weekend getaway. That $20 bill in the couch turns into $10 more in your savings and $10 for a mid-week take-out. The $10 in savings invested in the stock market will turn into $198 in 30 years based on an average return of 10%.  The $10 spent on pizza will be worth $0.00. (By the way, if you put $10 in savings every month during the 30 years, it would be worth $22,793.)

A couple of key tactics help. The first is that no amount is too small. The second is that the larger the amount of found money, the higher percentage you should be applying to savings. The 50% is a minimum, but if you get a really nice bonus or tax refund, try to put as much as you can towards your long-term financial goal. This system allowed us to eliminate our debt when we were younger and start to build our retirement fund earlier.

Building a comfortable retirement requires strategic planning and disciplined habits. By maximizing retirement contributions, being smart about investments, and utilizing ‘Found Money,’ you can significantly strengthen your financial security. Every small step counts, so start implementing these strategies today and watch your savings grow over time.

 

Dave Blancett, AFC® has been helping families plan their finances for more than 30 years. Visit Dave’s FindAnAFC profile to learn more about his professional services and to contact him for financial counseling, coaching, or education services.