Conventional wisdom says that you should start saving for retirement early because you have to contribute a lot less to get the same end result thanks to the magic of compound interest. But, what do you do if you have crippling student loan debt taking up precious money each month?
Make your student loan payments each month AND save a little for retirement.
I know this can be tough when you end up graduating in debt. Believe me. My student loan payments are over $800 each month. But, squirreling away a little money for a retirement can be done. And you do not need a six-figure salary to make it work.
4 Tips On Saving For Retirement While Paying Student Loans
1. Make A Budget. The first thing that you need to do is determine how much money you need each month to pay for bills and other expenses. This helps you realize some places where you might be able to cut back on your spending so that you can meet all your expenses and still put a little away in a 401K or Roth IRA.
2. Check Out Employer Match Options. Many workplaces offer an employer-match program for employees who want to save for retirement. Normally the way that this works is that the company matches a certain dollar amount or percentage of what you save in your company 401K plan. That means free money for retirement. You do not want to miss out on this, so inquire with someone from Human Resources at your work to determine if this is offered at your job. This is really the easiest way to boost your retirement savings while paying down student loan debt.
3. Automate It. If you can setup an auto-withdrawal from your checking account or from your paycheck, then you can save for retirement without even thinking about it. This is a great way to save because it almost triggers a thing in your mind where you think that it is a bill and not a savings debit. Over time, it just becomes another thing that you have withdrawn from your account or paycheck each month.
4. Start With Small Amounts. If your budget really is stretched and you cannot trim any other expenses, do not be afraid to start small with your retirement savings. Just $10 per week adds up to over $500 invested over the time span of a year. Or, you can make your savings a percentage of your paycheck. This works best if you are saving for retirement through your job.
Bottom Line – Think of your retirement saving as a fixed expense similar to your rent and your student loan payments. Sure, you can change the amount that you save with each contribution, but you MUST make it a regular part of your monthly budget.
Personally, I have a Roth IRA set up with Vanguard and I use their automatic investment plan so that I invest $15 every two weeks. And, it is automatically deducted from my checking account. Sure, that is not a lot of money at the end of the year, but it is better than nothing.