If you are living paycheck to paycheck, saving for retirement is probably not one of your largest priorities. However, it is possible to plan for retirement on a limited budget. Taking these steps can ensure that you can live comfortably during your retirement years and maintain your current standard of living.
Don’t Claim Social Security Early
Claiming Social Security early is a bad idea, because it means that you will be leaving money on the table that could make a difference in 10 or 20 years. Claiming benefits early can cost you tens of thousands or even hundreds of thousands of dollars in the long run. The longer you wait, the bigger your monthly Social Security check will eventually be.
Leave Your Home Equity Alone
Delay tapping into your home equity for as long as you possibly can so that it will be available to you in your old age. After you have retired, you can use your home equity for things like home repairs, increasing heating fuel costs, medical bills, or hiring in-home assistance. Do not fall for sales pitches that encourage you to drain your home equity while paying high fees to a company for expensive, higher-risk products.
Bankruptcy Is An Option
One of the worst things that you can do is sacrifice your retirement savings to pay your current bills. In many cases, your retirement accounts are protected from seizure under your state’s bankruptcy laws. If your debts equal half of your income or you are using your credit cards to pay your monthly bills, it may be time to throw in the towel and declare bankruptcy. Since bankruptcy laws can be complex, you may need to secure the services of a bankruptcy attorney to help you navigate the process.
Reduce Your Expenses
Most people that live paycheck to paycheck often feel as if they are stretched to the limit financially, but after a careful examination of their finances, there are areas where they are wasting money that could be used to save for retirement. If your current housing payment is eating up most of your income, consider downsizing to a townhouse or apartment that will cost you less each month. You can also cook at home more instead of purchasing fast food, downgrade your cable service, or choose a cheaper cell phone plan. Chances are, there are some areas of your life where additional savings can be realized.
Join our newsletter
Subscribe to get the latest "Engineer Your Finances" content via email.
Leave a Reply