Saving for retirement as someone with a single income is a realistic concern for millions of Americans, especially as inflation continues to rise.
In two years, inflation has risen from 1.4% in 2020 to 8.2% as of September 2022. Compounding the effects of inflation, 64% of Americans live paycheck to paycheck according to a 2022 research study by Lending Club.
Luckily for those struggling to save, the inflation rate is forecast to drop to around 3.5% by the end of 2023. By 2025, the Federal Open Market Committee projects inflation to return to around 2%. While this figure is still higher than the historical average, it could lower prices enough to make it easier for many Americans to save.
The tactics and experts’ tips in RetireGuide’s Expert Insights Roundup can help you achieve your saving goals. RetireGuide reached out to three financial experts from across the industry to offer some helpful tips for single-income earners preparing for retirement.
Expert Insights: Saving for Retirement as a Single-Income Earner
Stephen Kates, Certified Financial Planner™ and founder of Clocktower Financial Consulting
- “The simplest way to save for retirement will be through a person’s employer-sponsored retirement plan, the most common type being a 401(k). The salary deferral feature of a 401(k) and other employer retirement plans makes saving easy by automating each paycheck’s contribution.”
- “It can be very beneficial to discuss your plans and needs with a financial advisor who can guide you as you develop a firm plan. It is up to you to save and invest prudently but although you may be a single-income earner, you are not alone in figuring out how to accomplish your financial goals.”
Paul Sundin, CPA, tax strategist and CEO of Emparion
- “Get to know your personal financial identity by improving your financial literacy. Plenty of single-income earners find it challenging to save for retirement because they end up following the crowd in terms of their spending decisions, which causes them to make huge financial mistakes. By improving your financial literacy, you’re not only establishing your financial identity, but you’re also starting to recognize what financial resilience is.”
- “Automate your savings. As much as possible, take the opportunity to build your nest egg without having to think about it every time. It should always be one of your priorities, so it’s best to make your monthly retirement contributions automatic.”
Melanie Hanson, editor-in-chief of EDI Refinance
- “Your key here is going to be finding ways to keep your costs down. Roommates or living with family can be a great way to reduce your housing costs. Finding a job that you can work remotely or commute to without a car will also dramatically reduce your transportation budget.”
- “Starting early gets the power of compound interest on your side. Even if you can only set aside a small percentage of each paycheck, if you start while you’re still in your 20s, that money will have plenty of time to grow.”
Keep in mind that everyone saves at their own pace, and unexpected emergencies can cause dips in your retirement savings. But, to sum up, the experts believe that it’s best to start saving as soon as possible, look into participating in a 401(k) through your employer, consider speaking with a financial advisor, brush up on your financial literacy and cut costs wherever possible.
Everyone begins their retirement savings journeys differently. If you aren’t ready to cut any costs yet, simply improving your financial literacy can be your first step. You may be better suited to paying off any outstanding debts before bulking up your savings.
It’s also wise to consider speaking with your employer to ensure you’re being paid fairly. If you’re a woman with a single income, you could be underpaid: The Bureau of Labor Statistics conducted a nationwide study in the third quarter of 2022. They found women had median weekly earnings of $971, or 83.4% of the $1,164 median for men.
If you’re not being paid appropriately and are a single-income earner, your journey to saving for retirement becomes even more difficult.