Spend your way to retirement!

Wait…what? We’ve always been told that to save for retirement we need to cut spending on the lattes and put those dollars away for our future. That’s how you build a retirement nest egg.

Well, now there may be a way to save for your retirement and have your latte too!

Recently, a good friend (actually a great friend) of mine told me about a relatively new rewards program that puts a percentage of your spending into your 401(k) account. That sounded pretty good to me.

The company is called EvoShare and their platform allows you to get cash-back for your spending which then gets credited to your employer’s 401(k) or 403(b). 

From EvoShare’s website: EvoShare is a financial platform that enables employees to save for their 401(k) or 403(b) while shopping online and locally at stores, bars, and restaurants. Our service allows employees to spend at their favorite businesses, and receive up to 30% cash-back towards their retirement plan through their employer. 

[Please note: I have no affiliation or relationship with EvoShare.]

To make it work, your employer needs to agree to accept a file on a quarterly basis that creates a debit from your paycheck equal to the amount of the cash-back reward. That way, the contribution to your account is counted towards the annual contribution limits. EvoShare then sends the cash-back reward to you to reimburse you for the payroll deduction.

It’s an interesting concept and given that loyalty rewards are everywhere, it fits in nicely in today’s environment.

It got me wondering, how much could this potentially add to someone’s retirement nest egg? While the company’s website indicates you could receive a cash-back up to 30%, when looking through their online stores, the typical cash-back I saw was in the 3%-7% range. So, how much can it help? 

Let’s assume that you’re 25, you charge about $1,000 a month on your credit card and are able to get an average reward of 3% (recognizing not all of your spending is with participating vendors). Let’s also assume you earn about 8% in your retirement account and stick with this program for 10 years (something else always come up – you’ll leave your job, redirect your spending. etc.). Based on these assumptions, at age 40, your 401(k) account will have about $8k more, age 50 – over $17k, and at age 60 – more than $37,000.

10 years of participation and 35 years of growth

That’s not too bad for buying things and services through this program that you would have purchased anyway.

To be clear, racking up debt and paying ridiculous amounts of interest just to get a little added to your 401(k) account is not a winning game. If you have the discipline to pay off your credit card bill in full each month, this type of program can add some incremental dollars to your overall savings.

I think there also may be some hurdles to overcome for this to be successful and really take off. For instance, your employer has to agree to participate and they may not want the extra task of accepting additional payroll deduction files. If you change jobs often, it may not amount to much as your prospective employers will need to also participate for you to continue. You may not actually earn much in rewards if you don’t charge much or purchase goods from the vendors that are associated with EvoShare.

All that said, if made available to me, I would probably sign up and any extra free money would be a bonus to my savings plan.

What do you think? Would you participate of your employer offered it?

Thanks for stopping by.

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