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Changing the outlook on retirement saving through mind tricks

08/01/11

Saving for retirement is something that many Americans have trouble doing, as it's often difficult to put off today's purchases in order to put aside funds. A recent article published on U.S. News Money highlights a handful of mind tricks to help people overcome bad spending habits and view retirement saving in a more positive light.

The article recommends converting the dollar cost of discretionary purchases into time to help discern if the purchase is really worth it. For instance, a $100 item translates into five hours of work, assuming the person makes $20 an hour. Consider instead if that $100 might be better spent when added to a retirement fund.

To further help curb spending habits, the article recommends that people consider how much the money they're contemplating spending would buy them in retirement. Under the four percent retirement income withdrawal rule, a person on a fixed income could save around $600 a year by purchasing a used car for $15,000 instead of a new one for $30,000.

Instead of putting aside retirement savings in one giant fund and forgetting about them, think over what purpose the money will serve. The article asserts that people are more likely to save for retirement if they think over the fun things they can do with that money, such as travel.

Annuities offer a good opportunity for people to put aside large sums of money and earn tax-free interest.

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