Everyone knows saving for retirement is important, but for those with low income, this often seems like a pipe dream. Thankfully, professionals have begun speaking up and offering advice to the public. Here are some tips we have gathered:
- Automize your savings
- Set up direct deposits to a 401(k), IRA or other savings program.
- Pay off debt
- Before you can save, you need to eliminate debt. Prioritize high-interest debt first, and refrain from accumulating more in the future (such as with credit cards).
- Streamline your budget
- Take control of expenditures, and live moderately. Keep track of where most of your income is going.
- Minimize big expenses
- Focus on big-ticket items. Consider downsizing your apartment or house – often the biggest part of people’s expenses – or even finding roommates. If you own your home, look into refinancing your mortgage or renting out a room with services such as Airbnb.
- Take Advantage of Free Money
- Low-income families often qualify for tax refunds, such as EITCs. If your company offers a 401k plan, you should maximize your savings there as well.
- Find a side job
- Diversifying your income can be a huge help in building savings, and can often be done from home in your spare time. Utilize any strengths, skills or interests you may have, such as freelance writing or handy work.
- Increase your savings rate
- Over time, it is important to increase the rate at which you are building your savings. Some 401k plans offer a feature that automatically does this, saving you the hassle.
- Open an IRA account
- This can get you valuable tax breaks with your savings if you don’t have access to a 401k.
- Add tax refunds to savings
- Often the largest sum of money received during the year, this can provide a great boost to your retirement savings.
- Start saving as early as possible
- It’s better late than never! But it’s even better early, especially when it comes to savings. Timing can have a huge impact on your retirement account when that day comes.
- Withdraw your savings at the optimal time
- Withdrawing traditional 401ks and IRAs before age 59 ½ can result in up to 10 percent penalty fees. Be sure to understand the details of these plans before making any decisions.
- Avoid investments with high fees
- In trying to invest wisely, many people put money into mutual funds with high fees, which can shrink assets over time. Choose low-cost options when possible.
There are a number of ways to build savings for the future, no matter what your income. It just takes some due diligence. See the following articles for more information:
Which of these strategies have you used in the past to help boost savings? Where did you run into difficulties? Share any other tips you think might be helpful to the community!