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For “super savers” in retirement, good financial habits seem to go far beyond fattening their nest eggs, according to a new study.
Most of these workers—whose 401(k) contributions are at least 15% of their salary or 90% or more of the maximum allowed—also pay their bills on time (87%) and don’t overdraw their checking account ( 74%), according to Principal’s 2022 Super Saver Survey.
The report, which comes amid runaway inflation, rising interest rates and some rumors of an economic recession, was based on a recent survey of 1,120 people aged 18 to 57 with incomes ranging from under $35,000 to over $500,000. All respondents meet the principal’s definition of a super saver.
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While the thought of becoming a super saver may seem daunting, experts say small changes in habits and lifestyle can go a long way in helping workers increase their contributions.
“I tell people that good financial habits aren’t far removed from good eating habits,” said Kathryn Hauer, certified financial planner at Wilson David Investment Advisors in Aiken, South Carolina.
“You stay thinnest when you think about every morsel of food you put in your mouth, and you build the most wealth by scrutinizing every penny you share,” Hauer said.
Super savers drive old cars, avoid market worries
Principal asked respondents what “sacrifices” they had made to save for retirement. For example, 49% drive an old car, 40% do not travel as much as they would like and 39% say they own a modest home.
They have also taken steps to change their money mentality. Many (69%) aren’t worried about “keeping up with the Joneses” either, so to speak, and more than half aren’t losing sleep over their finances (56%).
Stock market volatility hasn’t scared off super-savers either: nearly three-quarters view the current market environment as a buying opportunity, an opportunity in which they can buy stocks at reduced.
The view comes as major indexes are down double digits this year. Until Wednesday’s close, the S&P500 slipped 17.2%, the Dow Jones Industrial Average was down 14.4% and technology loaded Nasdaq Compound had lost 25%.
Small changes in habits can boost savings
While some households may have little or no wiggle room in their budget to save more for retirement, others may simply need to alter their spending to free up more money for long-term savings.
Hauer said people tend to spend more money when they’re in a “high emotional moment,” which can lead to decisions that might not otherwise happen.
“It could be in a boutique to buy the perfect prom dress for your daughter or at the car dealership when you are fascinated by interesting additional features on [a car]”Hauer said.
If it’s hard to steadily increase your retirement savings with your current budget, try setting aside the occasional extra money that comes your way, like a birthday present or part of your tax refund.
“Deposit some surprise money into a retirement account,” Hauer advised.
In 2022, workers can store a maximum of $20,500 in their 401(k), with those age 50 or older eligible for an additional $6,500 in so-called catch-up contributions (for a total of $27,000 ). For Individual Retirement Accounts, the contribution limit for 2022 is $6,000 (with an additional $1,000 allowed as a catch-up amount).