Saving for Retirement, Even When Money Is Tight

When you're living paycheck to paycheck or juggling financial obligations like rent, student loans, paying down credit card debt, or childcare, saving for retirement can feel impossible. But the truth is, you don't need a lot of money to start saving, you just need to start. Even small amounts saved today can create significant savings over time. This article discusses how you can begin building your retirement savings, even with limited funds.

1. Start Small, but Start Now

   The most powerful tool for retirement saving isn't money, it's time. Through the power of compound interest, even modest contributions made consistently over decades can grow exponentially. If you can only set aside $25 or $50 a month to begin, that's okay! Focus on establishing the habit of saving regularly. As your financial situation improves, you can gradually increase your contributions.

2. Maximize Employer-Sponsored Retirement Plans

   If your employer offers a 401(k) or similar retirement plan with matching contributions, prioritize contributing enough to capture the full match. For example, if your employer matches 50% of contributions up to 6% of your salary, they will basically add another 3% of your salary to your 401(k). This match is essentially free money that boosts your retirement savings and helps your nest egg grow faster.

3. Explore IRAs When Workplace Plans Aren't Available

   Without access to a 401(k), an Individual Retirement Account (IRA) is a good alternative. For 2025, you can contribute up to $7,000 (or $8,000 if you're 50+). There are Traditional IRAs and Roth IRAs that vary in how they are funded and taxed:
   
   • Traditional IRA: Contributions are funded with pre-tax dollars which may reduce your current tax bill. However, withdrawals made in retirement are subject to income tax.
   • Roth IRA: While contributions are made with after-tax dollars, qualified withdrawals in retirement are tax-free.

4. Make Saving Automatic

   Set up automatic transfers to your retirement accounts directly from your paycheck or bank account. This “set it and forget” or "pay yourself first" approach helps reduce the temptation to spend and helps you consistently save without having to think about it. Over time, you will adjust to the slight decrease in your take-home pay and may even forget that money exists elsewhere.   

5. Balance Debt Repayment with Saving

   Paying off high-interest debt is important for your long-term financial health, but completely pausing retirement savings to focus solely on debt can cost you valuable years of compound growth. Instead, aim for a balanced approach. Tackle debt aggressively while maintaining at least a minimal retirement contribution such as enough to capture your full employer match.

6. Increase Contributions Over Time

   When you receive a raise, bonus, or pay off a debt balance, direct at least a portion toward increasing your retirement savings. Boosting your contribution rate by even 1% annually can dramatically increase your retirement savings without feeling much of an impact on your day-to-day finances.

7. Track Progress and Adjust as Needed

   Leverage free online retirement calculators to help you set realistic goals and monitor your progress. Consider speaking with a financial professional for personalized guidance. Many offer free initial consultations or affordable one-time planning sessions.

Remember, your retirement saving success isn't about your starting amount, it's about consistency, time, and gradual increases. Beginning with what you can afford, capitalizing on employer matches, and increasing contributions over time, will help you build a solid foundation for your retirement savings.

If you are looking for guidance on how to start saving for your retirement, a professional from FNBO can help you get started. Call or stop by today.