How to Become a Retirement Super Saver

Some Millennials are leading the way

Reviewed by David Kindness
Fact checked by Yarilet Perez

When it comes to retirement, many Americans remain financially unprepared. However, there is one group that may be winning the retirement savings game. A distinct set of Millennial super savers is making serious financial sacrifices to pad their retirement accounts. Here’s how to follow their lead.

Key Takeaways

• Some members of younger generations are saving a significant amount of money for retirement.
• Individuals can still save for retirement even if they don’t have a 401(k).
• Individual retirement accounts (IRAs) are the key alternative, although the annual contribution limits are lower than 401(k) plans.

How Some Millennials Are Saving

A survey from Principal Financial Group looked closely at the financial habits of Millennial savers who are saving 90% or more of the annual contribution limit in their 401(k) plans or are putting at least 15% of their income toward retirement. A common thread among these super savers is that retirement is their top financial priority.

In terms of how much they’re saving, 59% of these super savers are stashing away more than $20,000 for retirement.

To make those contributions, super savers are making trade-offs in other areas. According to Principal Financial Group, during the COVID-19 pandemic, 44% of super savers drove older cars so they could funnel more money into their retirement accounts. 38% said they were not traveling as much as they’d like, and 36% were doing do-it-yourself projects in their homes instead of hiring professionals.

What Are Those Sacrifices Worth?

Determining whether it makes sense to defer buying a home, skip vacations or drive an older car is ultimately a numbers game. Assume that a 30-year-old saver is contributing $16,200 to their 401(k) annually, with a 100% employer match of the first 6% saved. If that employee earns a 6% annual rate of return, they could retire at age 65 with more than $2.4 million in savings. If they contribute $18,500, that figure will grow to more than $2.6 million.

Using the median household income of $79,900 and a 6.8% contribution rate, the same 30-year-old would end up with around $1.1 million in savings instead, assuming a 6% annual return.

In 2024 and 2025, investors can contribute even more, since the Internal Revenue Service (IRS) increased the contribution limits for 401(k)s. For 2025, the maximum contribution limit for a 401(k)—as an employee under 50—is $23,500. It’s $23,000 for 2024.

Getting Started

How can you be a super saver if you’re not able to fully max out your plan, or you don’t have access to a 401(k) at work?

If you do have a 401(k), you can start by reevaluating your current contribution amount. At the very least, you should be contributing enough to get the company match. If you’re not, increasing your deferrals should be a priority, so you’re not missing out on free money.

From there, evaluate your budget to see if you can reduce or eliminate some of your expenses. When you can cut things out of your budget, you lower the amount of money you need to live on. That’s money that you could use to increase your 401(k) contributions.

Diverting your annual raise to your 401(k) is another option if you’ve already trimmed your budget as much as possible.

If your plan has an auto-escalation feature, that’s another way to build your savings relatively painlessly.

Saving in an individual retirement account (IRA) is another option if you don’t have a 401(k). The annual contribution limit for IRAs is lower than a 401(k), at $7,000 for 2024 and 2025. However, the money can still add up over time if you’re saving the maximum amount.

Remember, a traditional IRA or traditional 401(k) lowers your taxable income for the year, while a Roth IRA or Roth 401(k) allows you to make tax-free withdrawals after you’ve retired. (With a Roth 401(k), the account must be at least five years old for the withdrawals to be tax-free.) If you expect to be earning more later in life, tax-free withdrawals could yield more tax benefits than a traditional account. It depends on when you want your tax break: now (traditional) or in retirement (Roth).

How Much Can You Contribute to a 401(k)?

For tax year 2025 the 401(k) contribution limit for an employee who is under age 50 is $23,500. For those age 50 or older, it’s $31,000. For those age 60, 61. 62, or 63, it’s $34,750.

For tax year 2024 the 401(k) contribution limit for an employee who is under age 50 is $23,000. For those age 50 or older, it’s $30,500.

How Much Can You Contribute to an IRA?

For tax year 2025 the individual retirement account (IRA) contribution limit for an employee who is under age 50 is $7,000. For those age 50 or older, it’s $8,000. The same limits apply to tax year 2024.

What’s the Difference Between an IRA and a 401(k)?

A 401(k) is an employer-sponsored plan, whereas anyone with earned income can open an individual retirement account (IRA). The contribution limit for 401(k)s is higher than for IRAs. However, with an IRA, there are more investments to choose from.

The Bottom Line

Being a super saver isn’t an option for everyone. It’s possible, however, to build a sound retirement strategy even when you’re not maxing out an employer’s retirement plan. Saving as much as your budget will allow, getting an early start, and tucking money away consistently are all important steps for reaching your retirement goals.