6 Steps to Financially Prepare for Retirement (as someone without significant savings)

When you get older, months start feeling like weeks and years start feeling like months. One minute you might be 30 with a lifetime of experiences ahead of you, and the next, you are approaching your later years without a solid plan in place.

While it is nice to live life spontaneously, it’s also useful to be more in charge when it comes to money. Otherwise, retirement may roll around, and you have no idea how you are going to handle it.

If you are ready to finally start preparing for retirement as someone without any significant savings, here are the six steps you need to follow.

1. Start by Managing Any and All Debts

The first step is not exactly fun, but it is so important that you shouldn’t really move past it until you make at least some kind of plan.

Debt affects almost everyone at some stage. Most people have taken out a credit card at some point in their lives, after all. What makes the real difference beyond that is how you pay it off. If you are someone who has become overwhelmed with various debts, it’s now time to get them under control so that you can finally start saving properly.

The good news is there is a way to manage your debts even if it feels like you are swimming in them. Using a trustworthy debt relief company is a useful step, as you can team up with experts who understand how to negotiate potentially lower debt repayments for you. With this, you can reduce the overall cost that you pay back, as well as reduce the amount of time it would have taken you to get out of debt in the first place. Reducing the time and money spent means more money available to put into your savings.

2. Make the Most of Your Employer’s 401(k)

If you have an employer that contributes to your 401(k), it’s time to take advantage of that. In a way, it’s a lot like free money. It’s just that you don’t access that money until you are no longer in work.

Contribute more, and your employer will match that amount, meaning you’ll have more stored away for the day you retire. You’ll be grateful you started earlier.

3. Reduce Future Costs

When thinking about retirement, many people envision living a more luxurious life in a larger home with more frequent vacations. While you of course want to enjoy your retirement, it’s also important to be realistic, especially if you’ve left it a little later to start saving.

To make retiring easier on your future pocket, start reducing those costs early on. That might involve downsizing to a smaller property (which includes lower mortgage/rent/utility bills).

4. Consider a Second Income

For those who have left saving until later in life, you will feel like you have a lot to catch up on. You can’t save as much as if you started ten years earlier, after all. There is an option here, though, and it involves a second income.

Whether it involves getting a second job for a while or making money independently, perhaps by freelancing or starting a business, a second income will boost the money coming in each month and therefore mean you’ll have a lot more to save. If you’re serious about saving for retirement, you could even stash away every cent that comes from the second income, meaning you’ll accelerate your savings.

5. Look Into Assistant Programs and Healthcare

If retirement is approaching and you don’t have as much cash stored away as you’d like, there are other options, such as assistant programs and healthcare benefits. For example, Medicare is available for many people over the age of 65. If your income is on the lower end and that’s why you struggle to save, look into a program like Supplemental Security Income.

6. Set Up an IRA (Individual Retirement Account)

An IRA account works well for saving for retirement. There are two types:

• A Traditional IRA: This is when all contributions are tax-deductible. However, if you withdraw any money from the account, it will be taxed as usual.
• A Roth IRA: This is when contributions are only made with money that has already been taxed. So, once you have retired, the money withdrawn is completely tax-free.

Setting up an IRA sooner rather than later will put you on a path to saving for retirement. It’s easy to do, too, as you just need to choose a provider, select where to allocate funds to, and start contributing.