An image of a pen on paper

3 Tips To Turn Pocket Change Into Retirement Wealth

An image of a pen on paper
Shutterstock photo

M ost people don't need a survey to know that saving for retirement is a challenge. But the latest study finds that 21 million Americans aren't saving at all. And 30 million have tapped their retirement savings for an emergency within the past year, according to

Time and again, people lament that they can't afford to save more.

But you almost certainly can. You can actually perform fiscal alchemy, transforming pocket change into more than $120,000 in 30 years, by plowing it into mutual funds and other investments that you like.

Adding that much to your retirement nest egg can turbocharge your retirement planning .

And you can make that pocket change appear out of thin air, just by switching some minor daily habits.

Here are the steps. Divert just $2.50 a day into retirement savings. Invest it. And let's assume it earns 6% a year on average. That's doable. It's well below the average annual growth rate of large-cap stocks , which is higher than 10%, since 1926, says Morningstar Inc.

OK, so where does the $2.50 come from? Start by saying goodbye to your premium large coffee at a famously expensive coffee chain. Instead, buy the same-size cup at McDonald's or Dunkin' Donuts. You'll save about 50 cents per cup.

Another trick: once a week, drink water with lunch instead of a soft drink, suggests David Presson, senior vice president and director of investments for First Bank Wealth Management, in suburban St. Louis. You'll save about $2.

A third trick: brown bag it once a week, Presson advises. Let's say that saves you about $12 weekly, which works out to $2.40 a day.

Annual Savings

Those three steps save you $3.30 a day on average, above your $2.50 target. And the $2.50 daily savings adds up to $910 the first year.

Allowing for inflation driving up the cost of your food each year, if you invest the savings and it earns 6% a year on average, by year 30 you've got $120,580.

There are additional steps you can take to free up larger sums for retirement savings.

First, if you still haven't done so, pay off your credit card debt, avoiding interest charges of about 18% to 20%. "What investment earns you 18% to 20%?" Presson said.

Also, if you are car shopping this time of year, look for deals on last year's models. They're still brand new cars, but often go on sale when the new models arrive in the fall.

And if you are buying appliances -- especially more than one -- don't be afraid to negotiate on price, Presson says. Even if a big-box store won't budge on prices, a friendly salesperson might point out that a sale is coming up or how to get some little-known promotional discount.

And don't neglect basic savings steps. Maximize your 401(k) contributions. "If you can't afford to contribute the maximum allowed each year, at least aim for the maximum that your employer will match," Presson said.

Whatever your employer matches is like doubling your own contribution. The contributions are automatic, through payroll deductions, so you don't have to write a check. And you get a tax deduction.

"Say you kick in $100," Presson said. "Your paycheck does not go down by that much. If your withholding rate is 25%, your take-home only goes down by $75."

And don't delay. Take advantage of compound growth over time. "Start saving whatever you can as early as possible," said Geno Cufone, senior vice president of retirement administration at Ascensus, in suburban Philadelphia.

Cufone added: "It is never too late. Saving 1% is better than zero."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Mutual Funds