If you are living on a tight budget, you are probably struggling just to meet your expenses each month and may not even be thinking of putting aside money for savings. You need to change this mindset, as many experts feel that if you wish to retire and still maintain your lifestyle, you should have enough savings to cover 70% of your pre-retirement income each year.
Saving enough to retire may seem like an unattainable goal, and if you are not on track to save for retirement, you are not alone. According to a 2016 study from GOBankingRates, about a third of Americans have nothing saved for retirement, and another 23% have less than $10,000 in their retirement funds. However, there are things you can do right now to maximize your savings, even if you are living on a budget.
The skilled and seasoned Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer understand that even the most well-intentioned people can find themselves in a financial hole and need help figuring out how to save for retirement. We offer a free consultation to evaluate your situation and offer options to help you remain financially secure.
When to Start Saving
If you haven’t done so already, the time to start saving is right now. The younger you are and the sooner you start saving, the easier it will be. Even a small amount put aside weekly can grow into thousands over time, as interest is compounded. The more time you allow for interest to accumulate, the greater the growth will be, and the less you will have to set aside each month to reach your goals.
According to CNN money it works like this:
If you contribute $60 a month and earn 7% annual rate of return for 35 years – you will have saved $100,000. However, if you wait and have only 10 years before retirement you will have to contribute $600 per month at the 7% return to save the same $100,000.
Even if you can’t afford to save that $60 each month, it’s best to contribute a lesser amount now and keep increasing it as you earn more money or your financial situation improves.
How to Help Yourself Save
Even if you are struggling to come up with the cash for savings, there are things you can do to make the most of whatever you have. Here are some suggestions:
- Take advantage of employer contributions — Many employers match 401k contributions that you make, giving you the potential to double your savings. If you are putting that $60 a month into that type of plan, you will actually be benefiting from a contribution of $120 per month. The maximum employee 401k contribution for 2018 is $18,500, but if you are 50 or older, you can make an extra $6,000 “catch up” contribution into your 401k, for a total of $24,500, which grows tax-free.
- Open an individual retirement account (IRA) — If you are self-employed, you can still benefit from opening an IRA, which also allows your contributions to grow tax-free. IRA contribution limits are $5,500 for savers under age 50 and $6,500 for those aged 50 and up, as of 2017.
- Set up automatic savings — It’s easier to save when the money is set aside before you have a chance to spend it, so automate your savings by having a set amount of money automatically sent to your retirement savings account from your paycheck on a regular basis.
- Save anything extra — Once you are accustomed to living within your means, put anything extra into savings. For example, save any salary increases above cost-of-living increases, bonuses, tax refunds, gifts or inheritances.
- Cut cost of living and discretionary spending — Examine your bills and see where you may be able to cut living costs and trim unnecessary spending. Can you downsize and move to less expensive housing, or even a less expensive area of the country? Can you cut expenditures like eating out, subscribing to newspapers and magazines, gym memberships, expensive vacations, and instead substitute brown-bag lunches, visits to the library, working out at home, and budget travel? Keep track of what you are saving and add it to your retirement funds.
Changing these habits may require diligence and making some sacrifices, but examine your priorities, weed out expenses that are less important, and make saving for retirement a major goal.
Contact us for Help
The experienced and compassionate Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer know how difficult it can be to change lifelong spending habits, and you may well benefit from professional help doing so. We offer a free consultation to evaluate your entire financial situation, examine your income, your debts and your goals, and help you find solutions that work best for you.
To learn more about how our firm can be of assistance, call one of our conveniently located office branches or email for your free consultation so we can determine what savings solutions will work best for you.