In the 1980s and 1990s, Americans were able to build their
retirement savings with some heavy assistance from a robust stock
market and high interest rates. But in the 21st century, stock
market performance has been more erratic, bond yields have largely
shriveled below 3 percent and savings account rates have dropped to
With less help from investment returns, Americans need to take a
more rigorous approach to saving money to meet their financial
goals. Unfortunately, most have done just the opposite. Personal
savings rates averaged 9.31 percent in the 1980s, and then 6.71
percent in the 1990s. So far in the 21st century, they've averaged
just 4.59 percent.
While strong stock market returns and
high savings account rates
can make saving more rewarding, an uncertain stock market and low
savings account rates make saving more essential. Without
investment returns doing the heavy lifting, you have to make up the
difference through saving -- or else be caught short in
Meeting goals through increased saving
Therefore, think of saving money as a way of controlling your
retirement plan growth. If you practice more aggressive savings
techniques and add up the results as a percentage of your
retirement assets, you might find that you can create a pretty nice
substitute for the absence of stronger investment returns. Here are
some of the basic steps you can take:
Maximize company match on employee benefit
The easiest money you can make is if your employer matches part
of your 401(k) or similar contributions to retirement plans. It
is, in effect, an instant investment return. With other returns
hard to come by, leaving any of this money on the table would be
a sad waste of an opportunity.
Maximize tax-deferred savings.
Even beyond the limits of an employer's contribution match, you
have the opportunity to benefit from tax deferrals not only in
your employer's benefit plan, but also in your own IRA savings.
Investing up to the maximum limit in these plans will not only
make the most of the tax benefits, but will boost your personal
savings rate to more healthy levels.
Use your smartphone to save you money.
If you carry a smartphone, you have coupons in your pocket
wherever you go. Here's the thing about those coupons: Marketers
use them to try to influence what you buy, which isn't always in
your best interest. Don't buy something simply because you see a
coupon, but whenever you need to buy something anyway, get in the
habit of checking for coupons on your way to the checkout
Focus on fuel efficiency.
When the Consumer Price Index flared up in June, gasoline prices
posted the biggest increase. Paying attention to fuel efficiency
when you buy your next car will put you in position to save money
every time you drive.
If savings account rates return to the 5 percent range, or if
the stock market strings together several years of more consistent
returns, you'll get even more out of practicing the above
techniques. Until that happens though, these steps will
keep your retirement plan moving forward
. Either way, approaching saving more aggressively is essential to
21st century retirement planning.