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How to Save for Retirement When You Make Less Than $35,000

By Catherine Brock - Jun 18, 2021 at 7:15AM

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If you have $15 a month, you can start saving.

Stressed about your retirement prospects? You're not alone. A recent report from the Employee Benefit Research Institute finds that only 15% of individuals who make less than $35,000 a year are very confident they'll have enough money to live comfortably in retirement. One-third of workers in that income bracket are only somewhat confident in their retirement outlook, while 52% are not confident at all.

The good news is, you can change an uncertain financial future even with limited funds. Here's how. 

1. Review your spending

Your budget may be too tight for retirement saving, but it's a good idea to review your spending anyway. Challenge yourself to find $5. Hint: Grocery coupons can help you reach that milestone. Then, look for another $5. Perhaps you can carpool to work and save on gas. Repeat the process until you've unlocked every dime available.

Woman smiling in outdoor market because she knows she's saving for retirement.

Image source: Getty Images.

This is not an easy thing to do, and you may have to make some tough choices. But longer term, you should be rewarded for your efforts and discipline. You'll see how in the next step.

2. Invest your $5

If you have a 401(k), start making contributions in the amount you culled from coupon cutting, carpooling, and any other budget-trimming activities. If you don't have a 401(k), it's a good idea to open a Roth IRA -- preferably one that supports fractional shares.

Fractional shares are pieces of stocks that you buy for proportionally lower prices. If you can't afford a full share of Walmart (WMT 0.99%), for example, you could buy one-tenth of a share for one-tenth the price. If Walmart's trading for $137 per share, you'd pay $13.70 for your piece. You'd earn one-tenth the dividend, too.

Once your IRA is open, start investing in fractional shares of stocks or exchange-traded funds (ETFs) that hold stocks. You'll want to keep some cash or Treasury debt too. Use these resources to help you set up your portfolio: 

Your goal is to achieve market-level returns, which have historically averaged about 7% after inflation. The table below shows how much your contributions can grow at that earnings rate over time.

Monthly Contribution

Contribution Rate (% of Salary)

Retirement Balance after 10 Years

Retirement Balance after 20 Years

Retirement Balance after 30 Years


























Table data source: Author calculations.

You might be inclined to focus on the $2,516 -- and then disregard this whole process because that's not enough money to retire comfortably. You'd be right, but there is another perspective. In 10 years, you could turn $15 a month into thousands. Do the math and you'll see that about $700 of the $2,516 is earnings. That's easy income. All you must do is invest with discipline and patience.

Other takeaways to focus on are:

  • Time is powerful. Just compare the differences in wealth production from 10 to 30 years.
  • Even a little money invested can grow into more than you had before.
  • If you can pull together $100 or $200 a month, you can accumulate a six-figure retirement balance.

Targeting the 10% contribution rate

Financial experts will recommend you save at least 10% of your income for retirement. You can see why, judging from the numbers above. Unfortunately, scraping together $290 a month when you make $2,900 a month can be tough. It might even feel impossible.

A 10% contribution rate can be your future goal, but don't let the magnitude of that goal keep you from saving now. Today, you might save and invest $15 a month. Tomorrow, you'll find a way to raise your monthly contribution to $30 and then $45.

Every one of those dollars earns. And every dollar saved is a step closer to retirement confidence and financial security. Have faith you'll get there, even if it's $15 at a time.

Catherine Brock has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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