“I can’t afford to contribute to my employer-sponsored retirement plan”.
In reality, you can’t afford not to contribute, although 30% of employees forego their opportunity to get matching contributions. Many employers offer attractive matching donations to employees contributing to their own retirement funds. In a typical scenario you might contribute 4% of your salary to the plan and your employer will match that contribution – either dollar for dollar or at a 50% rate. Either way you earn a 50-100% return immediately. Even if all you do is leave the money in a savings account, you are well ahead of the game. Your employer may also be able to give you access to planning and investment advice, it is worth asking.
If your employer does not offer a plan you can still set money aside via an Individual Retirement Account (IRA). Your contribution may be tax-deductible and the earnings in the account won’t be taxed until you retire – two potential tax savings opportunities. As mentioned in my last post – the key is to begin saving and to set money aside from every paycheck.
If funds are tight and you don’t think you can “afford” to save, take another look at where you are spending your money. How often do you go out to lunch or dinner? Do you really need those new clothes, that new car, a weekend trip? There are almost always opportunities to reduce your spending without turning into a no-fun-having hermit. If you find a way to begin saving and keep saving, your retirement years will be more enjoyable – so go for it.