20 years of spending saps savings

A 30-year-old making regular deposits of just $50 a week adjusted upward for 3 percent inflation each year could amass close to $700,000 in 35 years with a low-cost life-cycle or target fund that earns the average historical stock market return. If an employer matches the deposits, that total jumps to $1.4 million.

Inflation eventually will cut those values by two-thirds, but even then, getting an inflation-adjusted $250,000 to start retirement just from saving $50 a week would put this saver far ahead of the average person.

Those who are approaching retirement age can draw on another tool to boost savings -- working a few years longer. Social Security benefits will grow, especially if you can delay taking your Social Security benefit until age 66 or even 70.

If you are entitled to a pension, working longer will help it grow because pension values are determined by length of service and your highest-earning years. Working longer also provides more opportunities to save. But perhaps the greatest benefit from additional work will come after the death of a spouse in the form of survivor's benefits -- both from Social Security and pensions. That's because by working longer, you provide a higher benefit to your surviving spouse.

There are other ways to save money or cut corners.

More ways to save
  • Get a part-time job.
  • Downsize your home.
  • Rent out a room.
  • Share living accommodations.
  • Reduce the number of automobiles in your household.
Plan to be financially solvent 
It's crucial to get out of debt quickly and start building savings that will be adequate for your older years. Remember: A credit card that maintains a balance from month to month is a financial killer.

Those who pay some attention to diversification and allocation of their investments will do far better than others who just let things go. Rebalancing investments gets you to buy when stocks are relatively low and sell when they are relatively high. You only have to do this once a year, perhaps after completing your 1040 tax return.

By contrast, the average person typically fails to rebalance and gets only a small part of the returns reported by mutual funds. This is because the investor tends to buy after the prices have already gone up and sell after they have gone down.

Finally -- and perhaps most important -- prepare yourself for growing medical costs as you get older. These are likely to be the biggest single cost we face. Consider that much of eye, ear and dental care is uninsured after age 65 -- the age when such problems often peak.

In addition to saving more for these expenses, remember that every age group can benefit by taking better care of their bodies. Eat healthy foods, exercise daily and improve your own personal economy by saving more money.

Henry "Bud" Hebeler is author of "Getting Started in a Financially Secure Retirement" and founder of


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