Saving for retirement is something most of us know we need to do, but can easily get lost in the traffic of other needs. This is especially true when you’re trying to save for retirement on a low income. A recent poll indicated that nearly half of Americans aren’t investing in the stock market. The main reason given was lack of money.
There very well may be times where you simply can’t put money aside for the future. It makes sense, on one level, when your budget is tight to justify not investing. However, you don’t want to be guilty of believing saving for retirement requires a lot of money. Even with a low income, you can start to invest in the stock market.
Look for Areas to Cut
The first and most obvious way to save for retirement on a low income is to look for expenses to cut. You may already feel pinched and have little to cut from your monthly budget. The point is not to completely deprive yourself of everything, but find areas where there may be some fat to trim.
Some places to look for financial fat are:
Your cell phone bill
Cable television bill
Magazine or paper subscriptions
Unused gym memberships
You may not unearth a lot of extra money by cutting some of these expenses, but it’s possible that you might be able to free up an extra $50 per month. That would provide a great start to saving for retirement.
Determine Your Options
There is a common misconception you need to have thousands of dollars to start investing for retirement. More is certainly better, but there are still options for those with limited funds.
Several online brokerages let you open accounts for $500 or less. If you have some specific stocks in mind, you might also be able to purchase them directly with little to no minimum requirement.
The IRS also allows for potential tax benefits if your income is under a certain level through the Saver’s Credit that might make it beneficial for you to look at putting a small amount away for the future. Regardless of which of these options you choose to pursue, the key is to have a plan and if you’re not able to start putting away money now, then save money each month until you can open a retirement account.
Take Advantage of Windfalls
When your normal income won’t allow for saving for retirement, it becomes important to find ways to use one-time influxes of cash to fund your retirement planning. The most obvious opportunity is if you receive a tax refund. The average tax refund for the 2014 tax year was just over $3,100. That amount provides a great base to start saving for retirement.
A tax refund is not your only option. Have you received a raise in the past year or think you’ll receive one soon? Use those extra funds to start putting away money each month. It’s also important to not overlook the opportunity for free money through a 401(k) match through your employer.
Time is What Matters
Don’t allow perceived lack of money to hold you back from saving for retirement. We all have to start somewhere – and that is nothing to be ashamed of. We also think if we don’t have much to invest that we should wait until we have more money.
Don’t fall into that trap! Don’t allow the amount you have be the focus, rather focus on starting. Money is certainly important, but time in the stock market matters more. The amount you have now may feel small, but time is the greenhouse that will help it grow. At the end of the day, it’s getting started that matters.
By John Schmoll, Staff Writer