I use a 'squirreling' hack to max out my retirement savings every year, even when I'm not sure how much I'll make


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Ever since I first opened my Roth IRA account in my early 20s to save for retirement, I've challenged myself to max it out come tax season, and so far I've been successful every year. Some years have been more difficult than others, of course, especially as job changes, moves, and new expenses crop up. But over time, I've established a strategy for maxing out my Roth that's seen me through thick and thin. 

The key is a process I mentally refer to as "squirreling" — hiding as much money as I can from myself every month, in as many places as I can manage. I'm not sure why real-life squirrels don't bury all their nuts in one place, but for this particular squirrel (me), one big stash often proves too tempting to carry me through the whole winter. (The metaphor is over now, I promise.)

Basically, if I have money sitting in my checking account, I'm inclined to blow through it without a second thought. So I've learned to trick my brain into saving and working within a smaller budget by manually shrinking my income, which I do by setting up automatic monthly or even weekly transfers to a variety of accounts.

How I started maxing out my Roth IRA

Roth IRA is a type of bank or investment account where your contributions are after-tax. This means you pay regular income taxes on the funds you earn, but you don't pay any taxes on withdrawals in the future.

The first time I contributed to my Roth, my parents generously contributed the first $1,500, leaving me to come up with the remaining $3,500. (That year's contribution cap was $5,000.) With limited options and just a few months before the deadline, I elected to take the funds out of my savings account.

Obviously I couldn't lean on my savings again the next year, so it was clear I needed a new strategy.

I sat down to crunch the numbers, looking to see how much I'd need to set aside each month to be able to max out my Roth come tax season. That year, the maximum was increasing to $5,500, which I was dismayed to note meant I'd need to save $458 per month. (Note that in 2020 and 2021, the maximum annual contribution limit for a Roth IRA is $6,000, plus another $1,000 if you're age 50 or over.)

That felt far too intimidating, so I checked what I'd need to save per week instead: $106. Better, but still a big mental jump; I couldn't immediately think of ways to cut that amount out of my weekly budget. So I went even further, dividing $5,500 by 365 to find out what amount I'd need to save every day. Finally, I got a number I could handle — just $16.

It's an amount I would unblinkingly pay for lunch and a coffee near my midtown Manhattan office, so I was confident I could reasonably go without it in my bank account.

How I implemented my strategy

During my time working for a restaurant group that didn't withhold taxes for its servers, I'd opened a high-yield savings account at Ally. I'd established a good habit of depositing 20% of each shift's tips there so I wouldn't be caught off guard with what I owed each April, and I turned to the account to address this latest tax obstacle as well.

I wanted to set up a daily automatic transfer, but the most frequent option available was weekly, so I set it up to grab $106 from my Bank of America account every week, and crossed my fingers. 

At first, it was tough going. I really did miss that extra $100 a week, and I was tempted to shrink or even pause the automatic transfer. But I knew I'd never make my goal if I did, and gradually, I got used to getting by with less. I made lunches at home, skipped lattes in favor of the office coffee machine, and recommitted myself to my monthly Metro card, curbing my habit of grabbing a car-share home on days when I was feeling lazy. 

By the time the next January rolled around, I'd made my goal — plus a little extra thanks to the high interest rate on the account. 

The second half of the strategy

My strategy had worked perfectly in the short-term, and I've transitioned it to long-term success as well by making sure that each increase in income is met with a matching increase in squirreling.

When I got a raise at work, instead of allowing my spending to balloon, I increased the amount of my monthly transfer. When I started picking up more bartending shifts to supplement my income, I did the same thing with my savings account, determined to build my savings back up to pre-Roth levels. Any time I felt a stab of fear about whether I could hack it at the same level, I reassured myself I can always decrease the amount that's withdrawn from my account each month. But that once the money is officially squirreled, it requires another level of need to get it out.

I have hit those levels of need a couple times, pausing the automatic withdrawals when I was laid off from my writing job, for example. And after that I dipped into my savings when my bartending income was decimated by a stalled liquor license. 

But every time, the moment my income has recovered, I've made sure to reinstate my automatic transfers so that whatever else happens, I can max out my Roth, because I know consistency there will serve me far down the line.

How saving for retirement is going

These days, I have four separate squirreling accounts: I have Acorns doing roundups and pulling $50 per month into a low-fee investment account that I try not to look at. I have my shared Simple account grabbing $50 every month for joint expenses with my boyfriend, and another individual high-yield savings account at Simple where I squirrel away $630 per month for bigger expenses, like the Invisalign I got earlier this year.

And then there's my original Ally account that I still use to save up to fund my Roth IRA. As my income has stabilized and I've gotten used to my aggressive savings plan, I've moved the automatic transfers from weekly to monthly, but otherwise the process remains the same. Around the middle of the month, when my invoices from freelancing tend to clear, Ally quietly and efficiently pulls $500 from my checking account, tucking it away until tax season, when this little squirrel hopes to be able to max out her Roth again.