Six Tricks to Spend Less and Save More For Your Retirement

Saving for retirement is one of the most important financial decisions we will make.  However, this can also be one of the hardest things to do as well.  In order to help boost your retirement savings, here are some tips to help you put away more for your retirement:

1) Use Roth IRA’s for emergency funds – This may sound a little funny, but in fact it works like a charm.  Instead of parking emergency money in a money market or savings account, put it into a Roth IRA.  A Roth IRA is just as accessible as a money market because you can withdraw your Roth IRA contributions at any time without penalty.  But, since it is inside a retireement account, our brains are less likely to pull that money out because it is set aside for retirement.  It takes away the temptation to raid your funds.

2) Picture your aged self- This one, too, sounds a little weird but it works.  Picture yourself when you are older and you may start to care more about saving for retirement.  Take a picture of yourself and age it using a multiple of online resources to do so, and this will allow you to see yourself when you are older.  This way, you start to visualize what your life will be like and then you start to take more ownership in your financial future.

3) Question all of your spending- The best question to ask yourself is “How do we spend less?”  The easiest things that we overlook in our budget are the things that are set up on automatic payment.  Some payments are fixed costs like a mortgage or a car.  But things like a department store credit card or daily trips to the coffee shop can be adjusted.  There is no problem with treating yourself, but you can start thinking of purchases as needs vs. wants.  This will help you be a better steward and more saving instead of spending.

4) Use auto-rebalance- This is the most important of the tricks that is under-utilized by the population.  According to a study of over 1 million Americans over a two year period, 75%-80% of them said they made zero trades in their retirement accounts.  While excessive trading is bad, no trading is also a formula for disaster.  This can cause your current portfolio to be overweighted in certain asset categories causing higher risk levels.  A prime example was the tech boom in the late 1990s and early 2000s.  In order to avoid unnecessary risk like this, rebalance your holdings quarterly so that your target mix of assets do not get out of sync.

5) Factor in Social Security-  This is a new way of looking at Social Security, not as an income stream, but a present value investment.  That means that your Social Security acts as a large bond that you currently hold in your portfolio that will pay out “interest” or payments later in life.  Because of this, you can factor that large “bond” into your retirement mix of assets and can still use stocks and equities as a part of your portfolio.  This will allow for better long-term growth because stocks outperform bonds in the long-term.  However, when we get clsoer to retirement, these numbers need to be adjusted and less stock should be owned.

6) Dollar-cost Averaging– This has long been known as a way to reduce risk.  Currently, that point is being argued in the financial world.  However, what cnanot be disputed is that dollar-cost averaging reduces your investor regret.  This allows a person that will be investing $6,000 in the year 2012 to split that investment up into 12 payments of $500.  This allows for the investor not to become scared about the market and not invest the $6,000 at all because of market conditions.  Because it happens each month, it is more out-of-sight out-of-mind for the investor.

In conclusion, it’s all a bout tricking our mind to do what is best for us.  Sometimes our instincts and emotions are wrong, and it can be tricks like these that help us stay on track.



The Lloyd Group Inc., Expertise you can rely on and a “Team” you can Trust. Mark A. Lloyd , R.F.C., is the principal owner of The Lloyd Group Inc. He has a staff consisting of accountants as well as a full support group to serve their clients needs. Mark has been the featured speaker at many Estate Planning and Retirement Seminars for many years. He has spent his career not only educating the community, but has attended, completed and received some of the premier designations offered in the financial industry.

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