Why aren’t you saving more for retirement? When most people get a raise they aren’t also increasing the amount they put away for retirement. But to be fair if you look at inflation most people haven’t gotten a legit raise since before I was born.
This is why I suggest you learn new skills and jump into companies at the beginning of your career. You can read more on how to make more money – my one simple strategy here.
It is also why many retirement accounts have the option to increase your retirement by 1% every year automatically. The issue with this is that most of those take effect on January 1st each year but I have never gotten my annual raise on that date.
For those that are just scraping by it doesn’t work. So let us look at how 401k’s work and why you need to maximize this as fast as possible if you are a high-income earner.
These ideas are based on my personal experience and opinion and should not be considered professional financial investment advice. Furthermore, the ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
- Retirement Savings Crisis
- The Retirement Savings Gap
- Why Are People Not Saving More For Retirement?
- Lack Of Emergency Savings
- Debt And How To Pay It Off
- How Much Should You Save
- Save more money for retirement by following these tips and tricks
- Debt Payoff and Budget
- Top Ways To Remain Poor
- How Can You Succeed Financially?
- Are you living your best life or are you stressed about paying the bills?
- About Dwight Scull
Retirement Savings Crisis
If you’re like most people, you’re not saving enough for retirement. In fact, retirement savings are in a crisis.
There are a number of reasons why people aren’t saving more for retirement. One reason is that salaries have stagnated while the cost of living has gone up. This means that people have less money to put into savings.
Another reason is that people are living longer and need to save more to cover the costs of a longer retirement. Finally, many people simply don’t know how much they should be saving for retirement.
The bottom line is that if you want to have a comfortable retirement, you need to start saving now. The sooner you start, the better off you’ll be.
The Retirement Savings Gap
Retirement might seem like a long way off, but if you don’t start saving now, you could end up in a difficult financial position later in life. It can be difficult to save for retirement when you’re already struggling to pay your monthly bills, but if you’re making more money than ever, there’s no excuse not to start putting away money for your future.
There are a number of reasons why you should start saving for retirement even if you’re barely scraping by. First, retirement is expensive.
Median retirement savings is $89,700 for those just about to retire and then it drops after age 65 because it is being used to live on.
Can You Live On Less Than $90k For 30 Years?
How many years will $89,700 last you? Maybe 2 years? Probably a lot less. That means that 50% of Americans will have less than 5 years of money saved up before they will need to radically change their lifestyle.
Medical Costs and Social Security
This doesn’t account for the rising cost of medical bills after you turn 70 years old and the potential for social security to cut payments by 25% in the mid-2030s if nothing is done because America is losing population year over year. It has nothing to do with unemployment and such. Though a recession could move this date up faster.
The point is there will be a huge retirement crisis as Gen X starts to retire especially with Boomers now retired and living longer on social security.
So why are people not saving more for retirement even if they are making 6 figures or are considered high-income earners?
Why Are People Not Saving More For Retirement?
A recent study found that people are making more money than ever, but they’re not saving more for retirement. There are a number of reasons why this may be the case.
One reason is that people are living longer and healthier lives and retirement seems like a long way off. With life expectancy increasing, people may feel like they have time to save later on.
Another reason could be debt. People may have higher levels of debt than in the past, which can make it difficult to save for retirement. This is especially true if interest rates are high.
Lastly, people may simply be spending more than they’re earning. This could be due to a number of factors, such as keeping up with the Joneses or impulsive spending. Whatever the reason, it’s important to try to live within your means so you can save for retirement.
Debt Payoff and Budget
If you are stuck in thousands of dollars of debt like I used to be (80k in student loans, more than 10k in credit cards and two car payments, etc.). This can help you.
Learn how to pay off debt – set your money goals and get a plan to get your net worth positive.
We track your income, debt, savings, and investments so that you can reduce debt and grow the other three.
Lack Of Emergency Savings
18% of those making over 6 figures a year are living paycheck to paycheck. It doesn’t matter how much you make if you don’t know how to manage your money.
You need to have at least $1,000 in savings and ideally at least 3 months of expenses in cash just in case you lose your job.
Surviving A Recession Means Having Cash
The big word in late 2022 is a recession. The issue with recessions is layoffs and higher unemployment. One thing people don’t get with unemployment is that if you are laid off at a 6 figure income you simply cannot apply for retail work. It kills your career.
It is better to have a gap then to drop down to 50% or less of pay. Also, unemployment should cover more than going to a retail job for example.
If you need to build up your savings read my article on How to save $3000 in 3 months. This will get you a head start on starting to live within your means. I am also not a fan of just telling you to get a second job. If you are working in IT as a high-income earner like I am you may not have a standard schedule to begin with so picking up door dash for maybe $15/hour isn’t really worth it. This article talks about how to cut unneeded expenses.
Top Ways To Remain Poor
By studying how people remain poor and by doing the opposite you can break the cycle of poverty in your life and the life of your family.
This concept is used by many successful people to get clarity as the brain can more easily see what is wrong with a concept than what is correct.
Check out this article on the top ways to remain poor and how to do the opposite here.
Debt And How To Pay It Off
If you are living above your means you need to stop that now. You will never get ahead in life if you continue to do that. If you are making a good income then you should be able to reign in your spending and work to pay off your bills.
There are several different payoff strategies to do that. The method I used, until I got disciplined with my spending, was the snowball method.
Debt Snowball Explained
To use the snowball debt pay-down method make a list of all of your debts and put them in order based on the amount you owe (smallest at the top to largest at the bottom).
Now list the minimum payments for each and how much extra you are able to pay each month.
Apply all of the extra and minimum payments to the debt with the least amount you owe on it. Then pay the minimum amounts on the rest (you don’t want to have any late payments).
Then once you have paid off the smallest bill – take the amount you were paying on that bill and add it to the minimum payment of the next smallest bill. Repeat this process and you will see your payments will get bigger and bigger as you pay off bills, like a snowball rolling down a hill.
If you want more help with this then please see my 12-month money goals, budget, and snowball debt printable on Etsy. Use the code NewCustomer for 10% off.
Once you have your debts paid off you will be able to take all of that money and invest it without any change in your lifestyle.
How Can You Succeed Financially?
There is a clear path toward financial success and security.
It isn’t just being a worker for 45 years. Although for some it may involve that.
If you want to know what practical steps are needed to achieve financial freedom read my article on how to achieve financial freedom.
How Much Should You Save
As much as possible, but most will say you should strive to save 20% of your gross pay. Now, this is more possible if you are making more than the median salary, have worked to eliminate debt, and aren’t spending money on overly expensive things.
Ideally, if you are making over 6 figures and have paid off your debt then it is time to look at investing the maximum (or as close as you can) to the yearly maximum in a traditional 401k program. Why a traditional 401k and not a Roth? Well, I have an entire article about how to reduce your taxable income that you can read here.
If you are able to put the legal limit into your 401k each year that will go a long way to helping you save for retirement.
Your 2022 Retirement Contribution Limits
In 2022, the 401k, 403b, and most 457 plan limits were $20,500 a year and $22,500 in 2023. If your company provides a matching program please get that match as fast as possible even if it means paying off debt slower. You can’t beat free money. This matching isn’t calculated in your $20,500 limit each year.
This means that if you make $100,000 a year and your company matches 5% of your earnings. You could max out your $20,500 a year and your company would contribute an additional $5,000 a year. This would mean that you would be saving $25,500 a year in your 401k or similar retirement program.
Are you living your best life or are you stressed about paying the bills?
In this quick 2-page PDF, I cover 5 ways you can get your financial life back on track.
I used to live paycheck to paycheck and after years of paying off debt and maximizing my investments I am now able to save and invest more than 45% of my wife and I’s gross pay.
This allows me to live comfortably (not a crazy rich person) and sleep better at night. If you want this let me know where I can send it to you below.
Save more money for retirement by following these tips and tricks
Most people aren’t saving more because they are living paycheck to paycheck.
Instead, get an emergency savings account of at least $1,000 so that you can stop going into debt.
Then put in enough money to get your 401k matching program if you have access to one.
Next use debt snowball to pay down your debt.
Wow, you read a lot to get here. Can you do me a favor, please? Can you leave a comment if this was helpful to you or if I missed something? Alternatively, it would help me out a lot if you shared this content with those that might need to see it. Thanks, you are the best!
After your debts are taken care of use that money to try to maximize the amount you can put into a 401k or similar retirement program. The faster you can put money into a retirement account the more money you will have in retirement. If you don’t know what to invest in please see my article on how to invest on autopilot.
About Dwight Scull
I have been married to my wonderful wife, Rebecca, who puts up with me since 1999. I am a proud father to my Gen Z, son, and daughter-in-law. Grandfather to my favorite granddaughter who was born in 2021.
I lost my mom, father-in-law, and 12 others in 2013 and was DEEPLY in debt. I started reading and watching all the financial info I could find.
I chipped away at my debt and went from a negative $105k net worth having one home paid off, no credit card debt, and saving/investing 45%+ of my gross salary.
I used these daily habits to lose 100 pounds and keep it off.
I believe that you can overcome any challenge you face if you just take small daily actions and be consistent with them. It is how you will be financially successful.
Join my free Facebook group to get a ton of free resources to help you get out of debt, learn how to invest your money and work toward having the option of retiring early.