I am obsessed with saving for retirement. I’m also obsessed with collecting things. So it’s probably not surprisingly that I love finding different types of retirement accounts, different ways to save for retirement, and OBVIOUSLY any way to get “free” retirement money.
So I think it’s time to share! Not only do I know you all love posts like this, but I also can’t wait to hear your suggestions and ideas for MORE ways that we can hoard away money for our golden years. So don’t hold back! Hopefully my suggestions can help you as much as yours will help us. 🙂
These are one of the most well-known retirement accounts and definitely the most common retirement plan offered by employers. Usually you opt into the program and money will be automatically deducted from your paycheck and put into the account. The money can only be used for retirement, so it will end up being an account separate from your personal checking and/or savings, but it is still an account that belongs to you and stays with you if or when you leave the company. There are two amazing things about 401Ks. First, being able to have money automatically deducted from your paycheck is GOLDEN. You will forget that you are even contributing and the money will just be growing in the background. Second, many employers will match a portion of your contribution, which basically means you’re getting paid more money. Why would anyone pass this up? This is one of the best sources of free money.
It won’t be long before pension plans will only be found in the Smithsonian next to VCRs and typewriters. They are quickly (and sadly) being replaced by 401k’s and it’s now very rare to find a company that offers them. If your’s does however – TAKE IT AND RUN. Pension plans are guaranteed paychecks until the day you die. The amount you will get is based off of tenure and salary, but with all the additional ways you can save for retirement these days, this is the best possible kind of security.
I love real estate as a long-term investment and my husband and I are hoping to make this a big part of our retirement plan. Real estate is definitely looooong-term though, so make sure your expectations are set properly. It’s not a get-rich-quick scheme and it’s honestly not nearly as glamorous as TV makes it out to be. But, if you do it right, it can be a really, really secure investment. My personal recommendation is to invest in a property that you will rent out because you’re then investing in cash flow, but if you’ve got a gift for fixing things up, then flipping might be the right fit for you! Your own home is also a form of real estate investment, so don’t discount paying off your own mortgage. Not only do you then own the home which could be sold for a lump sum, but you will also avoid making monthly mortgage payments.
IRAs (Individual Retirement Accounts)
This is another classic retirement account (similar to 401Ks), except it’s not offered through your employer so you can set it up on your own. There is a yearly limit to how much you can contribute, but it isn’t too huge, so your goal should be to reach it each year (right now it’s set at $5,500). An interesting twist on IRAs are their tax benefits, and you’ve got two different paths you can take. Roth IRAs let you pay taxes up front but when you take out your money in retirement, you pay NO taxes. Traditional IRAs are reversed – you pay no taxes up front, but will pay taxes when you withdraw in retirement. The right choice depends on your current tax bracket and what you think your tax bracket will be in retirement, so there’s a bit of speculation involved when it comes to making the right decision.
If you’ve always wanted to play around with stocks (or already do), then purchasing some with the intent of holding onto them until retirement could be a perfect plan. A lot of IRAs and 401Ks will let you choose your own investments, so you can do this within those plans, but you still can’t take your money out until retirement. If you set up a plan on your own that is not technically tied to retirement, then you can still take out the money if you have to. Since the intent is for retirement you obviously don’t want to do this, but sometimes it’s nice to have the peace of mind that you can get to that money if you really need to.
Here’s the key to investing long-term – buy when the market is low and DON’T sell unless you are really, really, really sure that the company can never recover. You don’t lose money until you actually sell, so don’t take that decision lightly.
Credit Card Retirement Rewards Programs
Right now my husband and I are using a similar rewards program to pay off our mortgage, but the second that is done we will start one of these. This type of rewards program is really straightforward – a set percentage of everything you spend (usually 1-2%) is deposited straight into a retirement account. While this may not be substantial enough to be your primary retirement savings, it’s an awesome bonus that comes with absolutely no effort – and no change to your current budget. AND it’s one of my favorite sources of income – FREE money. I honestly think you’re crazy to not take advantage of rewards programs like this.
Lump Sum Savings
This is one of my favorite ways to save for all kinds of things because you get to see huge shifts in your account, not the incremental growth that most other savings plans give you. Basically, you want to dedicate any lump sums you get throughout the year towards your retirement accounts. The most obvious lump sum is your tax return, but also consider any bonuses you receive or gifts that come for birthdays and holidays. A lot of times, seeing a huge jump in an account will motivate you to keep contributing, so this plan may actually help you achieve some of your other retirement goals.
Plan to Retire Abroad
I know this sounds like a really odd retirement plan, but hear me out first. There are thousands of retirement communities cropping up abroad that are full of retirees that are looking for a beautiful, comfortable lifestyle with all of the high-rate amenities that they are used to at home…which INCLUDES HEALTH CARE. And let’s be honest, healthcare is a scary, confusing, really expensive thing for most of us that may only get more scary, confusing, and expensive as we enter our golden years. A lot of these communities are located in beautiful exotic countries that have a way lower cost of living – like, a fraction of what we’re used to spending. So while it may not be for everyone, if you think this kind of lifestyle fits you it is a HUGE way to save on retirement expenses.
Pay Yourself First
This is such an important concept that almost all of us unintentionally ignore. Here’s the mistake we all make: we pay our mortgage or rent, then we pay for electricity, utilities, and cable, then the credit card, car payments, and insurance, then things like gym memberships, Netflix, and AAA. And then, only then, do we allocate some money for our savings. And then within that savings pool, we will set some aside some strictly for retirement. I mean, looking at that now you can see how ridiculous it is, right?
Here’s what really needs to happen – we pay ourselves FIRST before we start paying our debts and extra expenses. Retirement savings especially needs to be as important as paying the mortgage. It certainly doesn’t need to be as large, but it needs to happen regularly, reliably, and definitely before you pay for Netflix or your favorite magazine. It will force you to adjust your spending and you’ll get used to it before you know it.
When we committed to paying ourselves first, it forced us to take a serious look at what we were spending. We ended up finding big ways to cut our expenses and in the end, our quality of life actually increased – and we didn’t even feel the cuts!
Automatic Deposit to Special Account
Set it and forget it. That’s the name of the game with retirement savings and it’s the absolute best way to make sure your account grows steadily and reliably. You can set up an automatic deposit straight from your paycheck or wait until after the money hits your account. Either way, the best way to pay yourself first is to make sure you don’t have to think about the payment each month. The payments don’t have to be huge and they can go into a dedicated retirement account (like an IRA) or just an extra account that you are designating as long-term. Either way, what is important is that you are actually doing it.
Invest in a Health Savings Account
After a few minor health expenses that all came at the same time this year (because isn’t that always how it happens), I re-fell in love with my Health Savings Account. And while there are a ton of reasons that you should consider a HSA, one in particular gets me really, really excited – they follow you into retirement. AND they’re tax deductible (which saves you money). AND many companies will match your contribution (which is more free money). Since retirement will likely be some of the highest health expenses of our life it seems foolish to not be setting aside specific healthcare funds for anything that may come up.
Increase Your Contributions When You Get a Raise
This is a really sneaky way to increase the amount you contribute to retirement each year without feeling the pinch at all. The plan is simple – every time you get a raise, you immediately increase your automatic deposit, 401K allocation, or chosen form of contribution. The key is to do this immediately – before you even get the first pay check. Then, you won’t feel anything different at all. If you do this consistently then you can still make sure some of the raise goes to you. This way you can enjoy the fruits of your labor AND save for your golden years.
Employer Stock Purchase Plan
Some employers (especially large corporations) will offer employees an opportunity to purchase shares of their stock at a highly discounted rate or with a matching plan. Even though there’s always speculation involved when purchasing stocks, being able to buy them at a steep discount seriously increases your odds of making money. This is a huge opportunity for free money, and once you’re able to sell your shares (usually you will be required to hold them for a period of time), you can transfer your funds straight into your retirement account as a lump sum.
Save Your $1 Bills
This is an old-fashioned savings trick that can be especially fun for people that are anti-credit card. At the end of every day, run through your wallet and pull out any $1 bills – those get set aside for retirement savings. Since $1s feel like such a small amount anyways it won’t hit you really hard each day, but over time the savings can really grow. Just make sure you actually deposit what you’ve set aside and do this every single day (otherwise you’ll just end up spending some of your $1s).
Let me know if you have any other creative ways to save for retirement! Remember, what is most important is that you actually follow through and just do something.