May 25th, 2011
4 Ways to Save $50K for Retirement Now
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**Today’s guest post is contributed by Money Crashers.**
For most of us, retirement is a long way off (although not as far off as it used to be). Therefore, saving money for retirement may seem like an abstract topic.
Many questions arise when contemplating the subject: How much do I need to retire? How soon do I need to start saving for retirement? And the list goes on.
If you’re unsure about all of this, I’ve found four ways that you can save $50,000 for your retirement simply by tweaking certain things in your financial life now. And they are not earth-shattering, so why not take a look at them? Here are the four ways to save $50K for retirement.
1. Slash Your Mortgage
If you have the financial means to do so, refinancing your current 30-year mortgage to a 15-year loan will save you thousands in the long run. Rates are still pretty low with mortgage lenders like Quicken Loans, but you should move fast if considering this option. To see if this option is right for you, answer the following questions:
- Can you swing higher payments? If so, you can save right around 60% in interest by refinancing based on recent rates. If your current rate is above 5%, and you don’t think you’ll be moving within the next three years, you definitely want to investigate this option.
- If you can’t afford a 15-year mortgage, what about a 20-year loan? I don’t know about you, but I never even knew that a 20-year mortgage existed. If the payments associated with a 15-year mortgage are too steep, look into this option.
- Do you have enough equity? You’ll need at least 20% equity to make this a feasible option. If you have less, some lenders won’t even approve a refinance. Or if they do, they’ll require private mortgage insurance, which will add to your monthly costs.
2. Do It Yourself
I am a strong proponent of do it yourself projects. However, until recently, I hadn’t fully understood the effects these DIY projects have on my financial life.
Consider this: Over the course of 10 years, mowing your own grass could save you as much as $12,000. Pruning, mulching, and edging your own yard will pocket you around $10K. Clearing your own snow could save you a little over three grand, and fertilizing your own lawn will net you $6,000 in savings over the course of 10 years. Plus, throw in these additional savings:
- Insulate attic floor: $3,000
- Seal cracks in basement/attic: $2,400
- Install compact fluorescent bulbs: $2,000
- Insulate hot water pipes: $1,250
Add it all up and you get around $50,000 in overall savings. And trust me, all of these projects are what I like to call “DIY doable.” You don’t have to be a rocket scientist to complete these projects.
3. Trade Down Your Vehicle
With gas prices rising above the $4 range, the savings from trading down to a cheaper car model could be substantial. Consider this statistic: Over five years, you can save nearly $4,000 on gas alone by switching to a car that gets 30 MPG, from a vehicle that gets 20 MPG (assuming you drive the average of about 15,000 miles per year).
Besides gas savings, you’ll save on car insurance coverage and maintenance as well. Certain family sedans come with insurance premiums of under $1,300 per year (dependent upon a variety of factors), which could very well be less than what you’re paying now. And smaller cars tend to be cheaper to maintain, as labor costs and replacement parts are usually less expensive. Based on all of these factors, now might be an excellent time to “trade down” your current car.
4. College Tuition? Consider Going Public
This has always been a topic near and dear to my heart, but only because I didn’t do it. Encourage your child to enroll at a state university or community college for the first two years of their post-high school academic life and then transfer to a private institution. Once again, consider these numbers: The typical private school charges $37,000 a year for room, board, and tuition. On the other hand, the average cost of a public state-run college runs about $16,000, and in-state community colleges charge even less.
If you investigate your options and make the best choice, going this route should not affect your child’s overall academic resume in the least. Most of these community/public colleges offer classes that are 100% transferable. Research is the key here, and if your child has a specific private university in mind, contact the school to see if the credits earned at a public institution would be transferable. This strategy can easily save well over $50,000 in less than two years.
In short, the time to start thinking about retirement is now. If you don’t currently have any savings vehicles in your life (e.g. 401K or a Roth IRA), consider implementing them right away. In addition, there are several things you can do in your everyday life that will yield you more money for your sunset years.
Do you have any other ideas to get started on saving for retirement now?