“Super Savers” are those who put away far more money into their retirement accounts than the national average for a person their age. I, however, am a super saver – seeking out the best ways to get my money’s worth on purchases without resorting to outright austerity.
I just read a short but interesting article on Bankrate.com about those so-called “Super Savers”. What hit me were these statistics:
I started seriously putting away money in my mid-30’s – much later than the three people highlighted in the article. And I only contribute 8% of my pre-tax dollars into my company 401(k) – a LOT less than any of those 3 folks or what “financial experts” recommend. Yet I took advantage of other ways to make my savings grow:
- ROLLOVERS – I rolled over my 401(k) from my old employer into an IRA. The timing wasn’t great – it was right after the market crashed in 2007-08 and my 401(k) got clobbered. But I was also limited in how I could manage the regrowth of that money through my former employer’s program. So, I bought some great MLP stocks with excellent dividends, a great business model, and cheap shares. Add to that some mutual funds and blue chip consumer goods stocks and I was on my way.
- TAX BREAKS – A few years ago the IRS decided to let everyone transition money from their tax-deferred IRAs into post-tax ROTH accounts and then claim only 50% of that transfer in each of the next 2 year’s tax returns. I took a small percentage (I forget the amount, maybe 20%) and rolled it over. I would have done more but I didn’t feel like going broke paying back Uncle Sam come tax season so I moved what I could afford to move. Now that money can grow interest free.
- CASHING IN MY PENSION – Last year my former employer surprised me by offering me a choice of cashing out my pension, rolling it into my private IRA, or sitting on it and collecting those pension payments when I’m old & gray. After discussing this with my tax accountant (H&R Block is the best! Anyone near Morris County, NJ should use George Connelly in the Morristown office!) we decided that the best thing for me to do is opt for the IRA rollover.
- SLOWLY INCREASING MY ROLL – My current employer matches 80% of what I contribute to my company 401(k) up to the first 6% of my gross salary contributions. And for a long time I kept to that 6%. But as I got a better handle on my expenses and cleared out a lot of high interest debt I then upped that contribution to 7%. And then last year I increased it to 8%. This year, though, I kept to 8% and changed my Withholding instead to put more money in my paycheck now rather than wait until April to receive it back in a lump sum from the IRS.
- PERIODIC REINVESTMENTS – With the exception of my Berkshire Hathaway Class B shares, all of my other stocks pay dividends. Once each year I’ll take the cash amassed from those dividends and invest in something new. I take my time researching different companies and when I find something I like at an attractive price I’ll jump on it. Over time the dividends from that stock will also contribute to my cash holdings which will then be used to buy something else. Wash, rinse, repeat.
- AUTOMATIC REINVESTING – Some stocks and mutual funds allow you the option to have dividends and other distributions reinvested back into that vehicle. My AT&T stock is set up like that. Most of my mutual funds are, too. And the reinvestment may result in only fractions of an additional share, but those fractional shares do add up quick. And the more shares I get, the more I have contributing to the bottom line which buys me more fractional shares. And so on, and so on, and so on…
I still have a way to go before I can quit my day job but I’ve already built up close to $200,000 dollars across all of my investment vehicles. Not bad considering how late I started.