Contributing to retirement funds on a limited budget

The chances are pretty good that you don’t want to work forever. Eventually, you’re going to want to move out of the nine-to-five grind and into retirement. Even if that day is a long way off, maximizing the amount of money in your retirement account is a great idea. Your retirement funds are meant to keep your lifestyle intact after you leave the workforce, so the more you save, the more comfortably you can live into your old age.

But let’s be real – between inflation and the rising cost of consumer goods of all kinds, the money you save today won’t have nearly the same value when you reach your 60s. The progress you make can be hampered by market fluctuations, the relative value of the dollar, significant life changes – they can all have an impact on your retirement plans. Consider, too, that the nature of your compensation may change – you might not be able to dramatically increase your earnings as you age.

Feeling bummed out? Don’t…there are ways to increase your retirement savings, no matter what you’re earning or how little you are saving. We’re here to give you some ideas about what you can do today to make “someday” that much more enjoyable.

1. No matter how small…start now – many people make the mistake of waiting for a bigger paycheck to start saving for retirement. No matter how little you can save, or where you can save it, now is the time to start. Even if it’s only a few dollars every paycheck, it’s better than nothing at all when you blow out the candles on your cake at age 65.
2. Match as much as you can – If your employer offers a 401k match, make sure you’re saving as much as they are willing to match. For example, if your employer offers to match your 401k contribution dollar-for-dollar up to 6%, make sure you’re saving the full 6% of your paycheck each time. Don’t leave money on the table.
3. Learn about IRAs – An Individual retirement account (IRA) is a great way to save money for retirement. You can open an IRA with any number of brokers and you can get the savings experience that’s best for you. Whether it’s a Traditional IRA (where taxes aren’t assessed until after you start withdrawing in retirement) or a Roth IRA (where withdrawals are tax-free after a certain time, but all the money put in is after taxes), you can find an account that works for your lifestyle and saves you the big bucks.
4. Outsmart yourself – Let’s say you’re the kind of person who has a hard time saving money. Find a way to automate the process – take a certain amount of your paycheck every pay period and transfer it into a savings account. Talk to your HR/payroll department to see if they can help. If you never see the money, you won’t assume it’s available to you as part of your regular income, but you’ll be happy to know it’s somewhere safe.
5. Mind the pennies today to make dollars tomorrow – You’ve heard us say it before here on the SmartyPig blog, but sensible savings and budgeting are incredibly helpful, no matter how big your paycheck is. Sit down and look at your income through the lens of 50/30/20, meaning 50% of your income should go to NEEDS, 30% should go to WANTS, and 20% should be SAVED. If every hundred dollars you earned got split that way, you’d have $20 every time to count on down the road. With the right investment strategies, those twenties can grow into an amount of money you can use.

We understand how frustrating it can be to try and save for retirement when there’s money to be spent today. But remember - any amount of money saved greater than none is a great investment in your future. When you reach retirement age, you’ll be glad you have the extra capital to spend on the things that matter most – your home, your family, your hobbies, your travel, and anything else that makes you truly happy.