The lowest gas prices in years isn't only an opportunity for motorists to cut fuel costs -- it's also a chance to fill up your retirement savings.
Indeed, although cheap gas can boost the U.S. economy as a whole, many people would benefit more by squirreling the savings away in an IRA or 401(k) account.
Fidelity Investments recently released a chart showing how much a budget windfall could build over time if it were saved for retirement.
The financial firm says that if a 25 year-old realized a savings of $33 a month due to lower gas prices and channeled that money into their retirement savings, she could ultimately add about $330 per month to her retirement paycheck. If this person is retired for 25 years, the total extra lifetime payout would amount to roughly $99,000. If a 35-year-old saved $50 per month, he would boost his retirement paycheck by about $180 per month. That would add a lifetime payout of about $54,000 for the same 25-year retirement.
Of course, gas prices are unlikely to stay low for the next 30 years, meaning that people won't be able to put those savings toward their retirement. But that's when the power of behavioral economics can kick in, notes John Sweeney, executive vice president of retirement and investing strategies at Fidelity.
"Put your savings on autopilot now," he said. "If and when gas prices rise in the future, maintain your savings and find creative ways to deal with increased gas prices."
Sweeney pointed out in a recent interview that during the past several years, people have managed to accommodate increased gas prices by changing their commuting habits or improving their gas mileage.
That notion is consistent with findings from the Retirement Confidence Survey from the Employee Benefit Research Institute. The think tank says that the main reason people don't save enough for retirement is the cost of living and day-to-day expenses. Declining gas prices gives people a much-needed break to their regular budget to help them increase their retirement savings.
Want to feel even better about your retirement? In addition to setting aside your gas savings, take the time to determine how much you should be saving in order to retire comfortably, then boost your savings to that level. Recent guidance from the Boston College Center for Retirement Research can help you estimate the right amount.