The key to retirement saving? Talking it out

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My retirement planning had a huge uptick when I started working in a company that reported on the retirement industry.

I interviewed experts about investments, but, more than that, I talked about retirement more. Really, I talked about retirement with anyone who would listen. Family, friends, co-workers, anyone.

“I never thought I’d be thinking about retirement so much,” a co-worker said. “I just turned up my contribution to 5 percent.”

I started at the auto-default the company used of 3 percent. Then, I heard my co-worker. Five it is, I thought. I bet I won’t even feel the difference in my paychecks. I was right. It was barely noticeable. Within a year or so, I had dialed up my savings to 10 percent.

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Talk it out

So that’s my advice. Talk about saving for retirement.

Ask your friends or a cousin or a sibling how they’re doing, and how it’s going.

Go for transparency. No one has to say, “I have $500,000” or “I have $5,000 in savings.” But chat about when you started, what percentage you save, whether or not you do an IRA as well as a workplace plan. Ask your friends if they cut back spending in other places.

Trade information. I learned that too many investment choices can be overwhelming. That’s why more workplace plans — at least, the ones with more than 100 employees — try to limit the investment options to around 15.

That’s why I have my money in three funds. People call it the simple or lazy portfolio. It’s working fine for me.

Whenever I learn something, I share it with my friends. We talk about retirement the way we talk about our kids — not constantly, but we help each other out.

For example, a friend showed me her IRA statement.

“Why am I earning so little when the stock market’s doing so well?” she asked.

A quick look showed me that all her investments were actively managed with fairly high expense ratios.

I recommended she look for some index funds, because passive management is cheaper and the returns are comparable — sometimes better, depending on which study you read.

When I needed inspiration to save more, I asked another friend what percentage she saves. The answer surprised me because my friend, a photographer for a nonprofit, is not a zillionaire. But she has managed to amass more than 10 times her annual salary in about 20 years. She did it by increasing her contribution every year, and turning it up as high as possible.

“I tried saving the whole $18,000 one year,” she says, “but I couldn’t do it.”

If she can stay strong in the face of New York City’s many temptations, so can I.

Going out for dinner or drinks? Both of us almost never do. Shopping sprees? Nope. We also trade recipes and food shopping ideas — this is the person who taught me how to read the weekly grocery circular in advance and plan some meals around what’s on sale.

In some ways, saving for retirement is like dieting. A well-informed, supportive friend is priceless.

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Rite of passage

Tip of the week

No pension? No problem.

Who has a pension anymore? Practically no one, says Emily Brandon, senior editor at U.S. News & World Report and the author of “Pensionless: The 10-Step Solution for a Stress-Free Retirement.”

“You bear nearly all of the risks associated with your 40(k) plan,” says Brandon, “and your ability to retire comfortably suffers if you underuse the account.”

But there’s a striking difference between 401(k) plans and pensions, Brandon points out. The marker is your own participation. Pensions usually guarantee a specific payout once employees meet job tenure and age requirements. The responsibility to fund the account is the employer’s.

But in a workplace plan, along with your employer, you have to decide how much to deposit. Both you and your employer can stop contributing at any time. You have to choose investments. And all too often, you may know little about investing, even if your 401(k) provider offers a seminar about how the plan works. There is no guaranteed income at the end of the road.

There are ways to boost your chances, though.

“When used effectively, 401(k) plans pack the triple punch of tax breaks, employer contributions and investment growth,” Brandon says.

It takes discipline and a certain amount of know-how.

“Employer waiting periods and vesting schedules (can) make it difficult to take advantage of employer 401(k) contributions and high fees that reduce investment growth,” Brandon says.

To win retirement, you need to save as much as you can, and learn how to avoid taxes, fees and potential penalties from the account.

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Jill Cornfield

I'm a reporter at Bankrate, talking retirement – my own as well as yours. Sign up for my free newsletter.