Why You Can’t Count on ‘Burst’ Savings to Fund Your Retirement

In the race to save for a comfortable retirement, consider putting your money on the tortoise over the hare.

Making regular contributions at a steady pace (the tortoise) should lead to more money than by making irregular contributions from bonuses, raises and other “burst” saving (hare) methods that only happen when the extra money becomes available.

A report this summer by the research firm Hearts & Wallets, however, found that “burst” savers are more likely to put away enough money for a comfortable retirement than those who don’t. In fact, researchers found that 64 percent of such savers built a nest egg equal to at least 10 times their annual pay—a common benchmark for retirement.

Getting to $1 million or more in retirement savings is great–no matter how you get there. But in a country where only 15 percent of people make annual IRA contributions, and the personal savings rate is at a low of 3.7 percent, it seems rare to find someone with the discipline to put aside annual bonuses when large sums might be more enticing to spend on a vacation—or if they’re smart, put into an emergency fund or to pay down debt.

But if they can stick to their plan of burst savings, it can get them to a good retirement quicker than people who don’t do it, according to the study cited by Money Magazine. The research doesn’t say if they’ll get to their goal faster than regular, monthly savers, but says that the power-savers are more likely to get there than non-power savers, no matter at what age they started saving. For regular savers who don’t start contributing to retirement plans until later in life, it’s evidence that burst savings can help make up the gap.

“The most important thing for anybody is to have some kind of process, some kind of discipline,” says Mike Sena, a financial planning adviser in Canton, Ga.

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“Most of financial planning comes from behavior, rather than numbers,” Sena said in a telephone interview.

While he agreed that long-term and steady savings is more likely for most people to accomplish than having the discipline to save raises, tax refunds and other large sums that arrive a few times a year, the power-savers have the discipline to put the money aside and not spend it.

“At least they’re thinking about it and at least they’re doing it and they’re not spending the bonus or spending the raise.”

To the people who have such discipline not to immediately spend a large sum that falls in their lap, more power to them–they’ll likely reach their retirement goal long before others.

But for the millions of Americans who can’t put aside money in a savings or retirement account, there’s something to be said for following the advice of Aesop and his tortoise. While the tortoise wasn’t talking directly about saving for retirement after he won his race against the hare, Aesop’s tale offers smart advice for future retirees:

“Slow but steady progress wins the race,” says the victorious tortoise