Want to boost your retirement savings? Learn how to become a super saver and hit your long-term financial targets.

So, what defines a super saver? This term refers to individuals who consistently transfer a significant amount of their earnings into retirement accounts. According to a leading investment firm, super savers are those who contribute 90% or more of the IRS maximum limit or save at least 15% of their salary for retirement.

While saving that much might be a stretch for some, there are practical steps you can take to work towards that goal. Here’s how super savers achieve their savings objectives.

CHOOSE STAYCATIONS AND DRIVE OLDER CARS

Research indicates that super savers often opt for significant sacrifices, such as using older vehicles (49%) and limiting travel (40%), rather than making small cuts in their daily spending to maximize retirement contributions. For many (74%), the main driver is securing financial stability and a comfortable lifestyle during retirement (71%).

“One common trait among super savers is their unwavering focus on accumulating wealth for a brighter financial future,” says a senior vice president at a prominent investment firm. “They have confidence in their financial plans, which helps them stay the course despite market fluctuations or inflation. They follow best practices for retirement savings by prioritizing consistency and preparation.”

These individuals approach saving strategically. As a senior industry analyst points out, high earners often find it easier to save substantial amounts, noting that “saving $20,000 or more annually becomes feasible as income increases.”

ALWAYS CLAIM THE EMPLOYER MATCH

Before aiming to max out your retirement contributions, focus on monthly contributions to your 401(k). If your employer offers a matching contribution, ensure you contribute enough to receive that match. It’s essentially free money, as highlighted by the senior vice president. Additionally, contributing to a retirement account lowers your taxable income.

You might also consider setting up “auto-escalation” for your retirement contributions. This feature increases your payroll deductions automatically each year, ensuring you consistently save more. Aim to boost your savings by at least 1% annually or when you receive a raise. Implementing this could help you become a super saver in no time.

OPT FOR HIGH-INTEREST ACCOUNTS

Once you’re taking full advantage of your 401(k) match, direct any extra savings into a high-yield savings account or a Roth IRA. It’s crucial to look for options that provide higher interest rates rather than settling for traditional accounts that yield minimal returns. Some high-yield savings accounts are currently offering interest rates close to 5%.

COMPOUND INTEREST IS A POWERFUL TOOL

When it comes to saving and investing, starting early is essential. Even small amounts can accumulate significantly over time.

“Albert Einstein famously claimed that compound interest is the eighth wonder of the world,” says the analyst. “Time is a crucial asset for investors. Each dollar saved in your 20s or 30s could grow to $15 or $20 by retirement. With a 10% return, your investment doubles approximately every seven years. The longer you allow your money to compound, the better.”

Compounding occurs when your investment earnings generate additional earnings. Stay disciplined during market downturns; remember this money is for the long haul, so don’t let short-term fluctuations deter you.

DETERMINE YOUR RETIREMENT NEEDS

A useful guideline is to save 25 times your anticipated annual expenses, according to the analyst. This method allows for 4% withdrawals from your portfolio each year, typically lasting for a 25-30 year retirement. Factors like lifestyle choices and life expectancy can influence this estimate.

“Even if you intend to retire at 65, it’s wise to prepare for your funds to last at least 25-30 years,” he notes. This usually entails maintaining a portion of your investments in stocks during retirement. Having several years’ expenses covered by cash or low-risk investments, such as bonds, is crucial, but stock investments also provide long-term growth potential. A common rule suggests having 110 minus your age in stocks, meaning a 70-year-old might hold 40% in stocks. This guideline has evolved as life expectancies have increased.”

DEFINE YOUR RETIREMENT ON YOUR TERMS

With changing times, many people are working longer, often by choice. “Before retiring, the key consideration is whether you have sufficient savings or alternative income to maintain your desired lifestyle,” says the senior vice president. “While everyone has unique retirement aspirations, it’s essential to cover essential living expenses. If you can comfortably meet these needs, consider whether your savings align with your long-term retirement objectives.”

If you’re uncertain about your retirement needs, consulting with a financial professional can help assess your contributions based on your savings and goals. You can also explore tailored programs designed for those nearing retirement to ensure you’re on the right path.