How the financial habits of ‘super savers’ can help you build wealth

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For “super savers” in retirement, good financial habits appear to go far beyond fattening their nest eggs, a new study shows.

Most of these workers—whose 401(k) contributions are at least 15% of their pay or 90% or more of the maximum allowed—also pay their bills on time (87%) and don’t overdraw their checking accounts (74%), according to Principal’s 2022 Super Saver Survey.

The report, which comes amid raging inflation, rising interest rates and some talk of an economic recession, was based on a recent survey of 1,120 people ages 18 to 57 with incomes ranging from less than $35,000 to more than $500,000. All respondents meet Principal’s definition of a super saver.

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While the idea of ​​becoming a super saver can seem daunting, experts say small changes in habits and lifestyles can help employees increase their contributions.

“I tell people that good money habits aren’t too far from good eating habits,” said Kathryn Hauer, a certified financial planner at Wilson David Investment Advisors in Aiken, South Carolina.

“You stay the leanest when you think about every bite of food you put in your mouth, and you build the most wealth by scrutinizing every penny you part with,” Hauer said.

Super savers drive old cars, avoid market worries

The principal asked the respondents what “sacrifices” they have made to save for retirement. For example, 49% drive an older 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 mindset. Many (69%) also don’t worry about “keeping up with the Joneses,” so to speak, and more than half don’t lose sleep over their finances (56%).

Volatility in the stock market hasn’t scared off super savers either: almost three-quarters of them see the current market environment as a buying opportunity – one where they can buy shares at a discount.

This view comes amid major indexes falling by double digits this year. Through Wednesday’s close, the S&P 500 was down 17.2%, the Dow Jones Industrial Average was down 14.4% and the tech-heavy Nasdaq Composite had lost 25%.

Small changes in habits can increase savings

While some households may have little or no wiggle room in their budget to save more for retirement, others may just need to change their spending to free up more money for long-term savings.

Hauer said people tend to spend more money when they’re in “an intense emotional moment,” which can cause decisions that wouldn’t happen otherwise.

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“It can be in a store where you buy the perfect prom dress for your daughter or at the car dealership when you are carried away by exciting extras on [a car]Hauer said.

If regularly increasing retirement savings is difficult for your current budget, try stashing away the occasional extra cash that comes your way, such as a birthday gift or some of your tax refund.

“Put surprise cash into a retirement account,” Hauer advised.

In 2022, workers can save a maximum of $20,500 in their 401(k), with those 50 or older allowed an extra $6,500 in so-called catch-up contributions (for a total of $27,000). For individual retirement accounts, the 2022 contribution limit is $6,000 (with an additional $1,000 allowed as a catch-up amount).

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