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5 Tips to Become a Super Saver

Fidelity Viewpoints - 04/20/2016

The first steps toward saving can be the most important: Here are five tips to keep your momentum going.

Save in your 401(k).

For many people, a workplace savings plan, like a 401(k) or 403(b), is a great place to save. For one thing, these accounts provide tax advantages compared with other savings accounts, along with other services, including guidance and education. Your employer may offer a match - which is like offering you an optional pay raise. Are you going to say "No" to extra money?

Pay down high-interest debt.

Continue making your minimum payments on low-interest loans for college or a mortgage while saving for retirement and other goals that are important. But if you are paying more than 8% to 10% on any credit cards, student loans, or other debt, consider using extra savings to pay down the balance as quickly as possible. If you have multiple accounts, you should work on the one with the highest interest rate first. When that first debt is paid off, consider putting your extra money toward paying off the one with the next-highest interest rate, and so on. You may want to consolidate debt or look for lower-cost financing to help keep costs down while you repay what you owe.

Max out the workplace plan.

We think it makes sense to aim to save for retirement at a rate of at least 15% of your annual income each year - or up to the maximum allowed, which is $18,000 in 2016. If you can't get there all at once, don't worry: saving even 1% more of your salary can make a difference.

Fund an IRA.

You may want to consider an IRA, either a Roth or a traditional account. An IRA allows you to contribute up to $5,500 in 2016 and enjoy some tax advantages while you save.

Remember other savings goals.

It's also important to not overlook saving for your other goals, such as college or graduate school for yourself or your children. One way to save for a college goal is a 529 college savings account, which is a tax-advantaged account designed to pay for qualified higher education expenses.

Make it easy.

One last tip: Make it easy! Use direct deposit from your paycheck to all your savings accounts. Then give yourself a pat on the back: You're a smart - and super - saver.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

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