How to save for retirement when money’s tight
Despite the fact that most of us look forward to a day when we can retire and escape from the daily grind of our jobs, too few of us are saving money for retirement. According to some statistics, 38 percent of people say they live paycheck to paycheck, and one-third believes they’ll never be able to retire. Between the rising costs of everything from housing to food and slow wage growth, saving money for something as major as retirement can sound pretty intimidating. The good news is that it’s never too late to start, even if your budget is really tight.
Pay Yourself First
You may have heard this advice before and if so, it’s for a good reason: it works. Most people who are living paycheck to paycheck decide that they will set aside money for savings with whatever is left after paying the bills, but the problem is that there’s rarely anything left over. Change your approach by setting aside money for savings first, before spending anything on the bills. Even if the best you can do right now is $10 a week, it adds up and gets you in the habit of saving. If you have direct deposit, most banks allow you to automatically deposit a separate amount of money into savings. If you were to put $25 dollars out of every paycheck into savings automatically, you likely wouldn’t even miss it.
Take Advantage of 401K Matching
If your employer offers 401K matching, it’s definitely worth your participation. 401K participation comes out of your paycheck pre-tax, and employers may match up to a certain amount, usually between 1 and 4 percent of your pay. Some employers require you to work for the company for a certain length of time before matching your pay, which is referred to as “vesting.” Typical vesting periods are between 1 and 5 years. The money you contribute to your 401K is always your money, but if you leave your employer before the vesting period, you do not get to keep the employer’s contribution.
Set Up a Budget
Did we have to use the dreaded B word? For most people, budgets conjure up images that are the opposite of fun. Certainly, budgets force you to look at where your money really goes and may require you to cut back on some of your current expenses. But the good news is that a good look at where your money is really going often shows that you certainly can set aside some money for savings if you just use a little self-discipline.
Maybe instead of going out to lunch every day, you could even decide to brown-bag it once or twice a week and put the money you would have spent into a savings account for retirement instead. If you want to get more serious about retirement savings to see the balance add up more quickly, look at things you can cut that you probably won’t miss, like the pricey gym membership you’re not using or subscription services you rarely use. Even cutting out one night a month at the bar could easily free up $50 or more for retirement savings. If saving money becomes an important enough goal, you will see how quickly $20 here or there adds up.
