Retirement planning–that is, investing with a view to the future–isn’t just for the wealthy. A U.S. News and World Report article, How to Start Investing and Saving for Retirement With Little Money is packed with good info.
Many Americans have long assumed that investing in stocks, bonds, and mutual funds requires a substantial bank account. While that may hold true for high-priced stocks at the top of the S&P 500, it doesn’t mean investing is out of reach for those with limited funds.
Really, a primary goal of any who are looking ahead towards retirement is to ensure their money continues to work hard for them–in the present and in the future. Even if your retirement savings are limited, what are some ways you can maximize those funds so that you are better positioned looking ahead towards retirement?
This article provides a few basic steps to better position your retirement planning strategy–even with limited funds.
Start Small When Retirement Planning
When investing, start small and build momentum. If you’re living paycheck to paycheck or struggling to save, don’t stretch yourself too thin when starting your investment journey. Even if setting aside money seems difficult, consistency is key — small contributions can grow significantly over time. To illustrate this, you can use our investment calculator to see how even small contributions can produce a big number with enough time.
While the general rule of thumb is to save 20% of your income, that may not be realistic for everyone. If 20% feels overwhelming, start with 10%, $20 dollars a week, or whatever amount fits your budget. To begin, consider opening a high-yield savings account that offers four to five percent interest, rather than a traditional savings account with less than one percent annual percentage yield, or APY. And remember, investing comes with both rewards and risks. If it’s part of your financial strategy, it’s wise to consult a financial services professional to ensure you’re making informed decisions that align with your goals.
Review Your Finances
Before setting investment goals, it’s wise to start by assessing your current financial situation. Take a close look at how much of your income goes toward fixed expenses like rent, taxes, car payments, and student loans, versus discretionary spending on food, entertainment, and shopping. Once you have a clear picture, outline a rough plan for how much you’d like to invest over the next year. Establish a household budget, prioritize essential expenses, and set up automatic contributions to your savings and investment accounts to stay on track.
We understand that establishing a budget may not always be the most enjoyable activity, however, it is extremely important. To get a better grasp of the value a well-founded budget brings you, give our article, Budget – The Financial B Word, a quick read.
Maximize Contributions
Prioritizing tax-advantaged accounts is crucial because they offer significant benefits, though early withdrawals come with restrictions. Additionally, investing in taxable investment accounts can provide more flexibility for accessing funds when needed. If your employer offers a 401(k) match, take full advantage of it. Matching policies vary, but many companies match one dollar for every one dollar contributed up to three percent of your salary, then 50 cents on the dollar for the next two percent. This is essentially free money that can significantly boost your retirement savings.
Dollar-Cost Averaging
This article next recommends leveraging dollar-cost averaging, a strategy that makes investing more accessible through small, consistent contributions. With dollar-cost averaging, you invest a set amount at regular intervals — whether weekly, monthly, or even daily — regardless of market fluctuations. Many investment platforms now support this approach, allowing you to purchase fractional shares of stocks, mutual funds, or other assets with ease. The most challenging step is simply getting started, but once you do, those steady contributions can grow into substantial wealth over time.
Understand the Market
Educating yourself is just as important — stay informed by reading financial news, listening to podcasts, and following market trends that could impact your investments. The stock market is a complex ecosystem, and having a clear strategy is essential. And be mindful of common investing pitfalls — the biggest being emotional decision-making. Avoid buying or selling stocks impulsively. For example, don’t invest in an obscure cryptocurrency just because a friend saw quick gains, and don’t panic-sell a stock just because its price drops — especially if your overall strategy hasn’t changed.
Consult a Retirement Planning Professional
We recognize, however, that even the basics of a well-established retirement plan involves some measure of complexity and specialized knowledge. Too, your financial future shouldn’t be left up to hopeful guesswork. This is where expert retirement planning comes into play.
By consulting a retirement planning professional who will be able to leverage the correlation of your budget, existing financial position, and personal goals, you will be able to achieve a clearer picture as to how you stand with a view to your financial future.
Knowing how you stand at present with a view to your financial future along with creating a plan for that future contributes to peace of mind. If you’d like to attain that peace of mind, click the button below to book a complimentary retirement planning consultation with one of our financial professionals.
