Retirement "Super Savers" Are Dumping Money Into Their Retirement Accounts. Should You Join Them?

When it comes to personal finances, many people's worst fear is reaching retirement without a sufficient nest egg. It's a natural concern, and unfortunately, it happens to more people than you might imagine.

To avoid this issue, some people are dedicated to putting away a nice chunk of their paychecks as retirement savings. These Super Savers put at least 10% of their salary away for retirement, and according to a 2023 Transamerica study, only 44% of workers are doing so.

To avoid falling short on their retirement savings , people may be wondering if they should join the Super Savers club. But like most aspects of personal finance, the answer is very dependent on your situation. Let's take a look at what I mean by that.

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There may be more pressing issues than retirement savings

It's great to be in the position where you can afford to put money away for retirement. However, there are two financial moves you should ensure you've accomplished before making retirement savings the priority: establish an emergency fund and pay down high-interest debt.

Your emergency fund is your go-to cash stash in the event of, well, an emergency. Whether it's a medical expense, car or home repairs, or a period of unemployment, having this money accessible can prevent the need for costlier alternatives like personal loans or early withdrawals from retirement accounts.

A good rule of thumb is to have three to six months' worth of living expenses saved in your emergency fund. If your income is more unpredictable, you may want to consider increasing it further, but that's a good starting place for most people.

Meanwhile, the importance of paying down high-interest debt comes down to the difference between guaranteed versus not guaranteed returns. Stock market returns are never guaranteed, regardless of how great an investment may seem. The interest you owe on your debt, however, is guaranteed. You don't want to find yourself in a situation where you're paying more in interest than you're earning on your investments, and that's a very real possibility with things like credit card debt.

Never take the influence of time for granted

Once your emergency fund and debt are taken care of, the question of whether you should join the Super Saver club becomes a much easier yes. Of course, having large chunks of money you can set aside makes accomplishing your retirement savings goals easier, but you shouldn't overlook the power of time and the role it plays in your returns.

The more time you give yourself to save for retirement, the better. And it's not just because it gives you more time to save, either (although that's also important). It's because the more time you have, the more you allow your retirement investments to benefit from the power of compound earnings .

Thanks to compound earnings, the returns on your previous savings can end up far exceeding the value of your actual contributions. This is how many people can enjoy a million-dollar retirement without personally saving anywhere close to $1 million themselves.

For perspective, let's imagine you invest in a fund that averages 10% annual returns (similar to the S&P 500 ). If you invest $500 per month over 25 years, you'd end up with around $590,000. Of that amount, only $150,000 comes from your direct contributions; the remainder is the product of compound earnings with enough time to do their magic.

Don't focus so much on the future that you forget about the present

The thought of having a large nest egg in retirement can be very enticing, especially if it gives you the freedom to enjoy retirement the way you envision. However, the only time that's guaranteed is the present, and it's important not to lose sight of that.

If you're a high-earner and your financial situation allows you to put away lots of money for retirement while not compromising your current lifestyle, then by all means, max out your retirement accounts. However, if becoming a Super Saver forces you to live a life of financial deprivation, consider whether it's worth it.

By no means does this mean you should put retirement savings low on the totem pole, but it does mean that money is meant to be enjoyed when possible, and today is the youngest you'll ever be. Don't take it for granted.

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