Saving for retirement is a daunting task for many individuals, particularly those with a variable income. The ups and downs of income can make it difficult to set aside a consistent amount of money each month. However, with careful planning and some smart strategies, says Bill Schantz, it is possible to save for retirement even on a variable income.
Bill Schantz On Saving For Retirement On a Variable Income
Understand Your Cash Flow
The first step to saving for retirement on a variable income is to understand your cash flow, says Bill Schantz. This means taking a comprehensive look at your income and expenses and mapping out a plan for the year. Start by creating a budget that takes into account all of your expenses, both fixed and variable. Then, estimate your income for the year and compare it to your expenses. Look for areas where you can cut back on expenses or increase income to ensure that you have enough money to set aside for retirement.
Make Saving a Priority
Once you have a clear understanding of your cash flow, it’s time to make saving for retirement a priority. Even if you can only save a small amount each month, it’s crucial to start early and let compound interest work in your favor. Consider automating your contributions to a retirement account, such as a 401(k) or IRA. This way, the money is deducted from your paycheck before you have a chance to spend it.
Take Advantage of Employer Contributions
If you have access to an employer-sponsored retirement plan, be sure to take advantage of any matching contributions. This is essentially free money that can significantly boost your retirement savings. For example, if your employer matches your contributions up to 5% of your salary, and you contribute $5,000 per year, your employer will contribute an additional $2,500 to your retirement account.
One of the biggest challenges of saving for retirement on a variable income is the fluctuation of income from month to month. To overcome this challenge, it’s essential to be flexible and adjust your savings plan as needed. For example, if you have a high-income month, consider increasing your retirement contribution for that month. Alternatively, if you have a low-income month, you may need to reduce your contribution or skip a month entirely.
Invest for Growth
When saving for retirement, it’s essential to invest for growth. This means choosing investments that have the potential to grow over time, such as stocks and mutual funds. While these investments carry more risk than traditional savings accounts or CDs, they also have the potential for higher returns over the long term.
Consider a Roth IRA
If you expect your income to fluctuate significantly during retirement, a Roth IRA may be a good option for you. Unlike traditional IRAs or 401(k)s, contributions to a Roth IRA are made with after-tax dollars. This means that you won’t have to pay taxes on the money when you withdraw it in retirement. Additionally, Roth IRAs have no required minimum distributions, which means you can let your money grow tax-free for as long as you like.
Get Professional Advice
According to Bill Schantz, saving for retirement on a variable income can be challenging, but it’s not impossible. If you’re struggling to create a savings plan or invest your money, consider seeking professional advice. A financial advisor can help you create a customized plan based on your unique needs and goals.
Bill Schantz’s Concluding Thoughts
In conclusion, saving for retirement on a variable income requires careful planning, flexibility, and a willingness to prioritize saving over spending. According to Bill Schantz, by understanding your cash flow, automating your savings, taking advantage of employer contributions, investing for growth, and seeking professional advice, you can set yourself up for a comfortable retirement, no matter what your income looks like. Don’t let a variable income be an excuse not to save for the future. Start today, and watch your retirement savings grow.