The not-so secret of retirement saving

A reader of our Money Adviser newsletter took us to task last week. Our “Ask the Adviser” page had answered a question from a reader who wanted to know if he could avoid taking required distributions from his 403(b) plan. He calculated them at roughly $113,000 a year—a happy hardship if there ever was one.

Why, the complaining reader wrote, were we wasting space on that guy’s “problem” when many Americans have no retirement savings at all?

The easy answer is because he asked us. But the complainer still had a point. What advice would we have for people in that more serious predicament?

Well, life being what it is, many of us will go through a rough patch or two (job loss, health problems, whatever) when saving for retirement becomes all but impossible. The last thing we need is a finger-wagging lecture about mending our wasteful ways.

But when we’re in a position to save, it’s a good idea to do so. And the best way I know is the obvious one: Spend less than you take in, invest the difference, and then don’t mess with it.

Our Web site has lots of tips on saving more by spending less, most recently this article.

Next week I’ll pull together some additional suggestions on saving for retirement. Meanwhile, we’d love to hear about strategies that have worked for you. Just click on Comments, below. All we ask is, no finger wagging, please. —Greg Daugherty

Greg writes the “Retirement Guy” column each month in the Consumer Reports Money Adviser newsletter.

Comments

[John]

Historically my wife and I had a problem where we would use credit cards to make purchases (to get that 1% rebate from credit card use) and found at the end of the month we had spent more than we brought in. This eventually lead to not paying off the credit cards each month and then the vicious cycle continued and our bills got even higher as the interest on the debt was added to our outflow. Several years ago we implemented a system where we figured out all of our fixed expenses (averaged power, natural gas, water over the year) and saw what amount of money was left over. For us, we had $1,400 a month left over for all of our variable expenses ( clothes, food, entertainment, travel, vacations, toys). Each week we take out $350 and that is the amount of money we have available to spend for the week. Once that money is gone we have to wait until that week is over before getting the next $350. This system provides instant feedback to both of us on how much money we have to spend instead of being surprised each month that we spent too much. It makes us have to decide if the purchase is really necessary and prioritizes what is most important. A side benefit is I no longer get irritated when my wife buys Starbucks. Instead of feeling like the bad guy and telling her we can't afford a $5 coffee each day I tell her "Spend the $350 as you see fit, but remember that is it for the week so make sure that is how you want to spend it." This has had a very positive impact on our relationship where I no longer feel like I have to be the bad guy.

[Winston Loughlin]

For the average working stiff, stuff your 401K or IRA with all you can or all that's allowed before you even think about discresionary purchases.

Once you have accumulated $100k, find a good financial consultant to keep you on the straight and narrow.

Do all that for 40 years and hope for a good inheritance.

[medical alert]

being an undisciplined consumer throughout the years has a crazy amount of credit card debt, but now I only spend half of my pay check and save the rest. if rough to save but over time it will be beneficial