Saving for retirement is important. Even if you plan to work until the day you die, you never know what kinds of health problems might come up, forcing your retirement. But in this tough economy, who has the money to put toward retirement? It’s a difficult problem to solve.

What is a frugal person to do about saving for retirement?

Don’t Save for Retirement…Yet

If you follow Dave Ramsey’s Baby Steps, you know he advises you not save for retirement until you have paid off your debt and saved 3 to 6 months of expenses in an emergency fund. If you have high interest credit card debt, the interest you lose each month on your debt will be greater than any interest you gain from your retirement fund.

It makes sense, then, to pay off your debt before saving for retirement. Put all your resources into paying off your debt. When it’s gone, you can put all your resources toward retirement.

Research Retirement Saving Options

Should you invest in a Roth IRA or a traditional IRA? Which one is best for you will depend on your circumstances, and you should not make your decision without research. With a traditional IRA you can deduct your contribution now, but you will have to pay taxes on the money later. A Roth IRA is just the opposite. You don’t get to deduct your contribution now, but you won’t have to pay any taxes when you withdraw.

Both types of IRAs have different rules and regulations, so you’ll need to make sure you choose the best one for your situation. If you cannot decide on your own, you should consult a tax professional. What you choose will make a difference in your taxes, either now or in the future, and a professional can help you decide which type of IRA will be better for your situation.

Use Your Employer’s Matching Funds

If your employer offers matching funds toward retirement savings, be sure to max out those matching funds. It’s free money, so take advantage of it! Even if it doesn’t seem like your budget can handle saving for retirement, it would be well worth it to crunch the numbers and cut other expenses to take advantage of your employer match.

Once you’ve been saving for retirement for a while, you won’t even miss the money from your budget.

Make Saving Automatic

The easiest way to save for retirement is to make it automatic. Even if you can’t save much at first, have your savings deducted automatically from your bank account. Start with $25 a month. After you have become accustomed to a budget without that $25, see if you can up the amount to $30 a month. Continue adding to your monthly retirement savings until your budget truly cannot handle any more.

Put Your Raise Toward Your Retirement

If you honestly have no money to save toward your retirement, commit to putting your next raise into retirement savings. You are used to living on your current income, so when you receive a raise, you won’t miss the money you put into retirement savings.

Whatever your feelings about saving for your retirement, it’s best to get started as soon as you can. Pay off your debt, research your retirement savings options, and then find a way to save some money toward your retirement. You will be thankful when you’re older!

Do you save money for retirement? Do you have any tips?

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