Is it possible to create a good retirement plan if you earn less than $30 k a year?

Question

I'm currently just scraping by, though I hope to change my situation by getting a better job. That being said, though, is it possible for someone who earns less than $30 k a year to retire comfortably? I don't know what the future holds, but I would like to live comfortably and get some much-needed R&R in my golden years. Does anyone here have the scoop?:)

Answer 1

Yes it is possible to create a good retirement plan when earning less than $30k/year.

Even though you didn't give your age or any other criteria I will share with you what worked for me to retire:

Right off the bat, you must commit to saving 10% of
your pay now. Then everytime you get a raise, 1/2
of it must be added to your savings. (I was putting
away 20% of my pay + $500 to my Money Market
each month for the last 2 years before I retired to
ensure I had a nice cushion to make the transition.)

Work for a company that has a 401k or Cash Balance
plan that will match up to a certain percent of what you
contribute. Contribute that percentage to that plan.
If that's 3%, then you still have 7% to put in other plans.

Put 2% in regular savings to build yourself a cushion.
When you have $1200 in savings, buy a CD or put
$1000 into a Money Market Account. Then build it
up again & repeat.

The final 5% should go into IRAs. If you buy a Roth
IRA you'll pay tax now, then none when you withdraw
it. If you put your money into a regular IRA you should
be able to have it taken directly out of your paycheck,
before taxes, & deposited to the IRA account. Since
you'll probably be in a lower tax bracket by the time
you withdraw it, you should pay less tax on it. But, who
really knows what the tax system will look like by the
time they can withdraw it? I opened one of each.

Considering that interest compounds & if you keep increasing your deposits as your income goes up over the course of your career, you will have a nice nestegg to use in combination with whatever you will get from Social Security. (By the time I retired I was making around $45k/year.)

If you're not good with percentages, here are figures based on a $30k annual income:

$625/wk: 3%=$18.75 2%=$12.50 5%=$31.25
$2500/mo: 3%=$75 2%=$50 5%=$125
$30k/yr: 3%=$900 2%=$600 5%=$1500

The yearly total is $3k being saved with another, let's say 1% added for raises each year, x whatever the interest being paid averages out to be. There are plenty of financial websites out there that provide calculators for you to project this figure out x a % x # of years before you plan to retire to see what your total nestegg will be. Check them out, then determine if you'd need to put more $$ into 1 or more of the accounts to have enough to fit your needs. (Educate yourself about any account & how it works before you open it.)

Now, the other thing I had invested in over those years was my house, which I sold 2 years ago. With the housing market in the state its in right now, it is a buyer's market - if the buyer is aware of the pros & cons of home ownership.

Another thing to do is to seriously look at where & how you spend your money. I don't buy all the latest gadgets, I don't have cable, a cell phone, etc. I quit smoking & started doing my own hair & nails to save money. I've also gotten in the habit of going through my closets & anything packed away at least every other year to sell or donate things I no longer use or need.

Of course, there's also the Mayan & Nostradamus prediction that the world will end in 2012 - so why worry about it!

You have to do what works for you. What's the downside of putting away 10% of your income ?

Answer 2

I don't see how you can save for your future if you are only just scraping by at the moment.

You are saying that you need 30k a year to live on at the moment, and I expect that your expenses after retirement are not going to be that much lower, so you are going to need to save enough to provide say 20-30k pension each year (less the State old age pension, if there is one in your country).

Depending on your age, you need to think in terms of pension contributions each year of somewhere between 25% and 100% of the annual pension income you want in retirement. (That's a very broad range, and the contributions will depend on how old you are now, how old you will be when you retire, whether you have a dependant spouse, and how you will invest your pension contributions.) The point is that this is not going to be solved by saving $5 a month.

Answer 3

If you have a 401K at work start putting some money into it. If not start putting some money each week into a special savings account. When you get $1000 find a good broker and buy some stock. Stocks have the highest return over the long haul. If you live frugally and dont run up a lot of debt you can live comfortably.

Answer 4

kinda. having an employer spondored 401k hat matches your portion is a great idea! otherwise consult with a banker at te bank and tehy will discuss various solutions for you. a CD or money market account is possible.30k isnt 100k but you can still start something for yourself.

Answer 5

The earlier you begin, the more hope you have of success.