Enroll in Retirement Plan of Your Employer

If you’re on a tight budget, even the simple step of enrolling in your 401(k) or other employer retirement plan may seem beyond your reach. But there is a way that you can begin investing in an employer-sponsored retirement plan with amounts that are so small you won’t even notice them.

For example, plan to invest just 1 percent of your salary into the employer plan.

You probably won’t even miss a contribution that small, but what makes it even easier is that the tax deduction that you’ll get for doing so will make the contribution even smaller.

Once you commit to a 1 percent contribution, you can increase it gradually each year. For example, in year two, you can increase your contribution to 2 percent of your pay. In year three, you can increase your contribution to 3 percent of your pay, and so on.

If you time the increases with your annual pay raise, you’ll notice the increased contribution even less. So if you get a 2 percent increase in pay, it will effectively be splitting the increase between your retirement plan and your checking account. And if your employer provides a matching contribution, that will make the arrangement even better.

Blooom is a great tool for hands-off investment management of your 401(k). They’ll give you a free 401(k) analysis, telling you where and how they can optimize your investments. If you decide to use their services, you’ll be charged a reasonable $10 per month.