Saving for retirement is hard. It is even more difficult when you have a limited or low income. You may wonder how you are supposed to save when your paycheck will only stretch so far, but there are still some ways you can build a nest egg even with a smaller paycheck.
Examine your monthly expenses
The most obvious way to start saving for retirement, especially when you have a limited or low income, is to look at what you are paying in monthly expenses. While you may feel that your monthly budget is extra lean already, there are usually some ways to cut expenses that could free up some money for retirement savings. As an example, you might find that you could cut the cost of your monthly Internet charges by changing to a lower priced plan or taking advantage of a competitor’s rates by changing services. Once you have found ways to cut, put the amount of money you save each month right into your retirement account.
Use your IRS refund check to get started
Although some people look at their IRS refund check as either ‘Christmas in April’ or a chance to pay down some debt, consider using it or a portion of it as a way to jump-start your retirement account instead. Stash at least 10 percent of your refund check into a retirement account and put even more than into it if you can.
Take advantage of automatic savings
Have a small amount of money taken from your paycheck and deposited directly into a 401K or IRA retirement account each pay period. This keeps you from having to take action on your own, which could prove more difficult if you decide you need the money for something else. Michal Grinstein-Weiss, a leading expertand researcher in social and economic development, said in a 2015 interview with the money section of U.S. News & World Report that ‘defaulting to automation will ensure that Americans, particularly low income Americans, have a simple pathway to boost retirement savings.’
Start small and it all adds up
When you’re already pinching pennies until they scream, you may think there is no way to divert 10 percent to savings even if you wanted to, but don’t give up. Elle Kaplan, CEO and founding partner of LexION Capital Management, LLC, told My BankTracker that even saving a small amount is a start. She suggested reviewing your take-home pay and then taking the dollar amount of the first number of your pay and the change amount and depositing that into an IRA account. In her example, Kaplan said that if your pay is $314.27, you would take $3 and the change amount of .27 to equal $3.27. This is the amount you deposit.