5 ways to cut costs to save more for retirement

David Bakke is an author and blogger for the personal finance resource Money Crashers, where he discusses tips for saving money for retirement and generating long-term wealth.

When it comes to saving for retirement, many Americans are woefully behind. According to the Employee Benefit Research Institute, 56 percent of those surveyed said they had less than $25,000 in retirement savings, and 30 percent doubted they'd have enough money to retire. However, regardless of your situation, it's never too late to start making or increasing monthly contributions — and you'd be surprised at how many ways there are to free up extra money to put toward your golden years.

1. Refinance your mortgage

Mortgage refinance rates are still near historic lows. HSH.com reports that the average interest rate on a 30-year fixed is 4.01 percent, while 15-year fixed refinance rates are at 3.21 percent for the week ending May 31. Just be sure to investigate all your options, and consult multiple mortgage refinance professionals before making a final decision.

2. Trim your grocery bill

Extreme couponing can reduce your grocery bill by as much as 80 percent. And even if you take a less aggressive approach, using coupons is still a great way to save money. Pick up an extra copy or two of the Sunday paper and get out those scissors, and be sure to sign up for your preferred grocer's loyalty program to receive even more coupons in the mail. Organize them according to expiration date so you use them all in time.

3. Eliminate your landline

Eliminating a minor expense such as a home telephone can actually help you save a lot for retirement? For example, say you're paying $50 per month for a home phone. Get yourself a MagicJack Plus device (you don't even need a computer anymore to use it), and you'll pay $70 for the device and the first year of service, then about $30 a year after that. If you start using this at 40, you'll have saved more than $14,000 for retirement by the age of 65 – and that's excluding any interest you earned.

4. Review your data plan

When was the last time you reviewed your smartphone usage and compared it to your data plan? If it has been awhile, you may want to take a look at your last statement. According to BillShrink, many American households pay for as much as 8GB of data per month, yet only use a fraction of that. If you can cut this expense by approximately $30 per month, that's another $360 each year to tuck away for your future.

5. Start a side job

Need some ideas for ways to earn some cold, hard cash? Start off by cleaning out your drawers and closets, and sell your unneeded stuff online via Amazon or eBay. Or, learn to manage your personal time more effectively and start a consulting business based on an area you're well-versed in. Start by getting the word out to family and friends. Then, check out the website Meetup to see if there are other like-minded professionals in your area. Attend a gathering or two and shake some hands, and you'll find tips and advice on how to expand your side business idea. Start a Facebook or Twitter account to advertise your services through social media.

Final thoughts

Once you start to see a little extra at the end of each month, make sure you invest your savings effectively. If you participate in your employer's 401(k) program and they have a company match option, make sure you're contributing at least up to that limit. Next, look into a Roth IRA. You can contribute up to $5,500 ($6,500 if you're 50 or older) for this year and your qualified withdrawals are tax-free. The concept of saving more for retirement is great — just make sure those funds make it to their intended and most advantageous destination.

How much do you currently have saved for retirement?

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Curtis@PayOffMyRentals
7 years ago

How much do we have saved (invested) for retirement? I don’t look at the amount saved as much as the amount of income generated. We don’t intend a “draw down” type of retirement, but rather an “investment income” retirement. It took a few decades to really get a solid plan put together, but we have most of our investments in our rental real estate: 6 rental houses that currently net about 1k/mo. in free cash flow, but will net $2,450/mo. when paid off. We have just started our ROTH IRA’s again and now generate a measly $27.73/mo dividend income. That… Read more »

Barbara Friedberg
Barbara Friedberg
7 years ago

In addition to those tips, starting as young as possible contributing to a ROTH IRA and/or workplace retirement account allows your funds to compound over time and grow to a princely sum.

If you invest $380 per month over 40 years, at 7% return from a diversified portfolio of index funds, your wealth will grow to $1,000,000.

Wait 10 years and you will need to invest $820/month at 7% return to amass $1,000,000.

Only invest for 20 years and you will need to invest $1,920 per month at 7% to reach one million.

Ross Williams
Ross Williams
7 years ago

If you invest that money on yourself at 25 instead of setting it aside for when you are old, you will be way ahead of the game. The point of life is not to retire with your memories (and money). Its to create memories for when you retire. Money is just a tool of living, not its purpose. Save that same $380 per month and use it for a trip to Europe or Africa or Asia and it will be better spent. Use that money to buy a tent, sleeping bag, camp stove and hiking boots and you can spend… Read more »

Jane Savers @ Solving The Money Puzzle
Jane Savers @ Solving The Money Puzzle
7 years ago

$7,000 in private savings, $3,000 in the company pension but still weighed down by $15,493 of HELOC debt and I am in my late 40s.

I live very frugally but I don’t make much money. I can’t save until I am done with debt and I still have another 16 months to go before my debt is gone.

Making extra money is the only way to gather wealth. You can only cut so much and I have done that.

Elizabeth
Elizabeth
7 years ago

I have to ask, does anyone reading GRS not know these tips already? I don’t mean to sound harsh, I think this article would be great for a lifestyle blog or publication that isn’t focussed on personal finance. From a content marketing perspective, I’m more likely to click through to the website/blog if the post isn’t repeating the same old information. I do think the end point was a good one: don’t just cut expenses or earn more money, DO something useful with that money. Most of my retirement savings is an automatic transfer each month into a registered investment… Read more »

Diane
Diane
7 years ago
Reply to  Elizabeth

I’ve felt this way myself about reading the same information all the time. The Simple Dollar gets particularly tiresome. But then I realized that I’ve been reading these blogs for years, but brand new readers keep coming along, so this information needs to be recycled. It’s like with paper magazines.

Elizabeth
Elizabeth
7 years ago
Reply to  Diane

I see your point, but I have to agree with the comment below about “weak tea.”

I think any increase to one’s savings is a good thing, but it doesn’t solve the problem that many people treat savings as “what’s leftover” rather than basing their lifestyle on a budget where savings are put first. I think that’s the java.

Evangeline
Evangeline
7 years ago

We all grasp the point of making any changes possible to secure a financially strong retirement, but this article was a little like sipping weak tea when you were expecting a strong cup of java.

Jan
Jan
7 years ago

I am not surprised with the report. IRA and 401K started in 1974 and they did not take real shape until the mid 1980’s.. My mom has well over seven figures and only has 1/20th in “retirement”. We never made over six figures, but have a seven figure net worth- 1/10th in “retirement funds.” Couple people like us with the 20-30 year old crowd who have just begun savings the financial industry is trying to scare your group into living for tomorrow instead of today. Crazy. Just be frugal and save. We retired our mortgage 11 years ago (I was… Read more »

Lane
Lane
7 years ago
Reply to  Jan

Sounds like what we have done. I really don’t get couponing– the vast majority of what is offered is processed food. We never eat this, our food budget is spent on whole largely organic food.

Andrew
Andrew
7 years ago

If you live on the stuff they typically give coupons for you won’t have to worry about retirement; you’ll have died of a heart attack, stroke, or diabetic complications long before.

Evangeline
Evangeline
7 years ago
Reply to  Andrew

LOL! Just use coupons for what you cannot eat or grow in order to spend more money on what you can eat. Think: paper goods, toothpaste soap, things like that.

Dina
Dina
7 years ago

Forget the coupons. Coupons tend to be for brand name processed crap. Learn how to cook from scratch. I feed my husband and I for between $50 and $110 per week (we do have a big garden that I know is not possible for many people). I avoid anything in cardboard box or plastic. We eat a lot organic and local and I never buy factory farmed meat. I also make my own cleaning products using things like vinegar and borax.

adult student
adult student
7 years ago

Really? Two of these five tips deal with decreasing your phone bill – who is spending so much on phones that they can’t save for retirement? Two also require owning houses (refinancing the mortgage and extreme couponing – you need a LOT of storage space to make that work, a 1 or 2 bedroom apartment is not going to do it). For people in their 20s and 30s who are not making enough above their minimal cost of living and student loan bills to buy a house, and who are already trying to have reasonable phone plans, this is silly.… Read more »

Adam
Adam
7 years ago
Reply to  adult student

I know plenty of people who always complain about money, and often ask relatives for help, but carry around smartphones (and sometimes the kids have smartphones too). It’s a common problem, in my experience. Smartphones are the new way of “keeping up with the Joneses.”

krantcents
krantcents
7 years ago

Cutting your expenses is very important! I brought my lunch to work and still do for 40+ years.

Ross Williams
Ross Williams
7 years ago

Buying local and organic food is a good idea. But is is NOT a way to save money. The key to buying stuff on sale, whether with a coupon or not, is to only buy the things you would otherwise buy at full price. Otherwise, you are spending more money by using the discount, not saving it. Small expenses can certainly add up. Just look at transportation costs, which now account for about 30% of people’s income. The costs are broken into small pieces so they don’t really notice. Move closer to work and you can save a bundle. Especially… Read more »

Dina
Dina
7 years ago
Reply to  Ross Williams

You didn’t attach a reply directly to me, but I should clarify I can afford to buy local and organic because I cook from scratch. No it is not financially cheaper, especially if someone was to compare it to buying processed food at Walmart, but I do include in my considerations my family’s health and the health of the environment – both of which I consider priceless. I think we totally agree on your other points.

Thomas
Thomas
7 years ago

Simple tips but I guess there are still a lot of people out there that haven’t done them. The phone bill is the first thing I would have cut way before anything else. These are basic and can help but the problem ends up being that though money gets saved it doesn’t always go towards the actual saving for retirement. I have a few people that have cut bills by 50% and saved hundreds per month and the money still isnt going towards retirement. You need to save and cutting back doesn’t force you do save more for retirement.

Annette
Annette
7 years ago

Be careful about nixing your landline in favor of something like MagicJack. A friend of mine did this to save money (she has MagicJack) and when we talk over the phone the line is either fuzzy or we lose the connection entirely.

Also, be sure that your cheap phone solution guarantees a reliable emergency (911) service.

JerryB
JerryB
7 years ago

I have just over $300k in various retirement plans, 401k, Roth IRA and a taxable brokerage acct that is doing way, way better than my company 401k.

I paid off my mortgage 2 years ago next month and haven’t looked back.

Couponing of any sort is not for me. I live within a short bike ride, weather permitting, of several stores and look to see what’s on sale. I love chicken and have it several times a week (I’m eating home made chicken stew with dumplings as I type this), someone always has leg quarters on sale.

bobj
bobj
7 years ago

You have to figure this stuff out BEFORE you retire.

Robert Jacobs
Robert Jacobs
7 years ago

250k+ in retirement savings
15% of our gross income goes to retirement
Debt free except for the mortgage
Age 40

Becoming debt free really freed up our income to go towards retirement savings. Best thing we ever did.

celyg
celyg
7 years ago

Mortgage on a condo, about to close a refi which will mean mortgage wll be less than potential rent payment (we are trying to start a family and will eventually buy a house, so will rent the condo out). About $300K in 401k accounts. $105k in a separate real estate investment company. 120K in emergency funds and down payment fund. No CC debt, no car payments. We are 42 and 36. Still feel way behind. Husband and I put the max into our 401ks but are not saving to separate IRAs. All savings is going toward the down payment, which… Read more »

El Nerdo
El Nerdo
7 years ago

“Extreme couponing” only works for processed foods which make you sick and taste disgusting anyway, and you end up paying more in medical bills.

I’ve never seen “xtreem coopon” for grass fed beef, wild-caught fish, pastured eggs/ milk/ butter, quality produce.

With fresh food, what’s on sale is what’s about to rot/ go rancid/ spoil. “I’ve got me some gulf shrimp with xtreem coupon”. “Awesome, we should cook and eat it at the emergency room to save time.”

Mom of five
Mom of five
7 years ago
Reply to  El Nerdo

I think coupons are getting a bad rap here. I typically save 12% to 18% with coupons and I once saved 47% – but those days seem to be gone as manufacturers have tightened rules. Some food, like peanut butter, yogurt, and Cheerios, may be too processed for you, but I can’t imagine not having those items in my house nor would I buy them without a coupon. Full disclosure – my husband eats different yogurt which only rarely has coupons and he and I don’t eat cereal (nor do I eat yogurt) at all anymore, but teenage boys don’t… Read more »

Dina
Dina
7 years ago
Reply to  Mom of five

The rule for coupons should be if you normally would buy it without a coupon then it is probably a good deal if you have a coupon. One tip, the author here mentions buying a newspaper for coupons and that just adds to the cost. The best way to find coupons is to go to the website of the corporation who makes the product you use and sign up for special offers. You can even request coupons and often companies will email them directly to you. I recently wanted to try a low-carb product for my diabetic father and the… Read more »

Michael @ The Student Loan Sherpa
Michael @ The Student Loan Sherpa
7 years ago

Along the lines of eliminating the landline. I’d highly recommend cutting cable: http://studentloansherpa.com/cut-the-cable/

Adam
Adam
7 years ago

I’m 25, with about $25K saved for retirement. I don’t currently have the option of a 401(k), but I max out my Roth IRA and HSA (which I use mostly as a retirement vehicle). I’m also paying down a modest amount of student debt, and trying to build a 3-month rainy-day fund (eventually I want it to be 12 months). I cut costs by cooking at home (which I enjoy), living with housemates (rent is only $250 for me), and being disciplined with my budget. I’m also considering biking to work, because it’s only 4 miles away. My roommates have… Read more »

Ross Williams
Ross Williams
7 years ago
Reply to  Adam

@Adam – If retirement is your first priority in life at age 25, you are making a huge mistake. Spending your youth working to support yourself in your old age is a bad idea. You can expect to live another 50 years, but there is a 50-50 chance you won’t even live that long. The hysteria around retirement is driven by an industry built on people’s retirement savings and by us baby boomers who are panicking at getting old. Your first priority should be investing in yourself. You are much better off spending money to enrich your life now, than… Read more »

Adam
Adam
7 years ago
Reply to  Ross Williams

I get what you are saying, but I have to disagree. Because of compounding, the opportunity cost is too high NOT to save now. The earlier the start, the better. Your 50/50 metric is outlandish as well, and not even remotely close to the truth. That being said, I don’t live a boring or unsatisfying life. I go out with friends, I buy treats for myself here and there, and I have lots of fun, I’m just better about deciding where to spend my “fun money” than most people my age. It’s about value for me. Quality over Quantity. For… Read more »

Ross Williams
Ross Williams
7 years ago
Reply to  Adam

“Your 50/50 metric is outlandish as well, and not even remotely close to the truth.” The life expectancy for men between 20 and 29 is 72 years old. That is the median age, so half of all men in that age range will die before age 72. Of course there are any number of things that might improve your individual chances, but on average your chance of living 50 years is actually less than 50-50. “That being said, I don’t live a boring or unsatisfying life.” Then why would you save money to retire? You need to figure out why… Read more »

lmoot
lmoot
7 years ago
Reply to  Adam

Where exactly did he say he plans on retiring when he’s old? Most people working that hard, that early towards retirement, are planning to retire early. He doesn’t even have a 401k, he’s contributing to a ROTH which only has an age to withdraw limit on the earnings.

Retiring when old is for those who don’t put so much effort into retirement, or who voluntarily retire late, or never retire.

Adam
Adam
7 years ago
Reply to  Adam

@Ross “You need to figure out why you want to spend the money you are saving for retirement when you are old, instead of spending it now.” Simple: I don’t want to be a leech on society who lives off the government and my children. I want to be an early retiree who gave his children a leg up (that I never had), spoils his grandchildren, and frequently travels the world with his wife. If I am unable to do the latter, I’ll be more than content with the first two. I’m curious: Pretend I take your advice, living completely… Read more »

Ross Williams
Ross Williams
7 years ago
Reply to  Adam

“Pretend I… make it to my 70’s and 80’s with little in retirement savings”

There is a lot of life and opportunities between 25 and 70. You would be a lot better off if you invested in taking advantage of them. Instead, you are putting aside those opportunities to pay for retirement 50 years from now.

lmoot
lmoot
7 years ago
Reply to  Ross Williams

Adam, don’t worry you are doing the right thing. I’m 29 and the light bulb went on for me at about 23. I contributed up to my employer’s 401k match, and bought my first house, a fixer-upper at 25 (I lived at home for 2 years after college to save for it). 4 years later and my PITI payment is 1/2 the rent for an apartment in the same area. That’s just one example of the major pay-off of early investing. I get the same kind of kick-back from people when they hear my “extreme” plans, which are really just… Read more »

Ross Williams
Ross Williams
7 years ago
Reply to  lmoot

Any “older person” who criticizes someone who has made 7 month long trips to Africa at age 29 as somehow not living life to the fullest is an idiot.

lmoot
lmoot
7 years ago
Reply to  lmoot

Ah see, and that’s the conundrum. So many people (at least the people I’ve encountered) associate “living” with the accumulation of objects and a string of non-stop expensive experiences–which become mundane eventually.

They may not know about my travels (though I do have family there, so thankfully it’s only been $2-3K instead of $6-7k per trip), but they know what they don’t see and therefore they think I’m missing out.

lmoot
lmoot
7 years ago
Reply to  Ross Williams

p.s. I’m saving money for a month-long trip to West Africa next year (my 7th trip there). Adam, are you my doppleganger?

lmoot
lmoot
7 years ago
Reply to  Ross Williams

Where exactly did he say he plans on retiring when he’s old? Most people working that hard, that early towards retirement, are planning to retire early. He doesn’t even have a 401k, he’s contributing to a ROTH which only has an age to withdraw limit on the earnings.

Retiring when old is for those who don’t put so much effort into retirement.

Mom of five
Mom of five
7 years ago
Reply to  Adam

One thing to keep in mind is that life’s not fair. All kinds of things can happen and the person who plays by the rules doesn’t always win. You can save and save for retirement and the government may end up confiscating everything over 2 million dollars that you have in tax advantaged accounts like 401k’s and IRA’s. Why is saving for retirement more important than paying off your debt? You’ve already proven you can live on very little so in all likelihood you won’t need a huge retirement fund anyway. Personally, I’d pay off the debt first and then… Read more »

lmoot
lmoot
7 years ago
Reply to  Mom of five

I agree about paying off the debt first, or at least funnel most of the money towards the debt…IF it’s interest-bearing debt.

He may be able to live on very little, but may not WANT to live on very little in retirement. I know when I quit working, I plan on spending up to 3x (adjust for inflation) what I spent while working.

Adam
Adam
7 years ago
Reply to  Mom of five

I chose retirement over debt because of compounding. At my age, the potential for investment earnings is much higher over the long run than the added interest I’ll be paying. The interest rate on the loans is quite low, and I do pay more than the minimum (actually about double the minimum). I follow a 70-30 rule, where 70 percent of my leftover income goes toward paying down debt, with 30% to savings. If I want to splurge on an item, I do the 70-30 divide first, then take money only from the 30% side.

Jake @ Common Cents Wealth
Jake @ Common Cents Wealth
7 years ago

I may only be 24, but I’m already worrying about my retirement savings. I’ve done the first 4 items on the list just in the past year and it’s added up to a couple thousand dollars a year. It’s amazing where you can find some extra money if you just look around. The key is to put this extra money straight into retirement instead of just spending it on something else.

infmom
infmom
7 years ago

Firmly disagree with the advice to get rid of the landline. A landline works when the power goes out. No other kind of phone does. You can sign up for the phone company’s metered service, which costs a lot less than their full service.

Viola
Viola
7 years ago
Reply to  infmom

Not sure about your area, but in my area, even the “landlines” are digital. You have to buy a battery backup source in order to have a phone during a power outage. It’s very frustrating! The cost of the back-up battery and the monthly digital phone service weren’t worth it to me.

lmoot
lmoot
7 years ago
Reply to  infmom

Really? In my area, the landlines (the cheapest ones) are bundled to a digital box (with the cable and internet)…and that definitely goes with the power.

It’s my cell phone that works, even if the closest tower is on the failed grid, I can still pick up on another tower usually. But when I try to call someone on a landline in the same area, their phone is down.

Amanda
Amanda
7 years ago
Reply to  infmom

I agree about not ditching the telephone line. When Hurricane Charlie went over our heads, we had no power for weeks, but the phone on the wall kept chugging. One of the things people who have not been through a natural disaster do not appreciate is how completely cut off you are from any information, and how desperate you are for it. That landline was a life-life for everything from contacting my insurance company to calling the state consumer protection office to make sure the roofer that turned up was not a scam artist, to finding out where ice and… Read more »

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