Saving for Retirement When You Live Paycheck to Paycheck

by Emily Guy Birken on November 5, 2012

We all know that we need to be saving for retirement. Gone are the days when hard workers could count on company-sponsored pensions and Social Security to comfortably see them through the golden years. But putting money away for retirement seems like a low priority when you’re barely making ends meet. According to a CBS News report, about 38% of Americans live paycheck-to-paycheck, which makes it extremely difficult for them to put away money for retirement.

But even in a hand-to-mouth existence, it is possible to find ways to carve out retirement savings. Here are some tips for saving even when there’s regularly too much month at the end of your money:

Start With an Emergency Fund

Even if the word budget makes you break out in hives, one aspect of budgeting can really help you break the paycheck-to-paycheck cycle: an emergency fund. If you can find a way to set aside $1,000 for the inevitable financial emergencies, it will make it much easier for you to allocate some of your paycheck toward your retirement.

Even if you have trouble putting a little bit of money away each month toward an emergency fund, there are other ways to fund it. Use any windfall or found money as the start of your emergency account. If it’s money you’re not counting on, then you won’t miss it. In particular, using your tax refund as emergency fund seed money is an easy way to have an almost instant emergency fund—and tax season is just around the corner. (Start planning that use of your refund now so you won’t feel cheated out of your usual windfall spending.)

Once you have an emergency fund, you will be better able to weather ups and downs in your finances, which means more of your paycheck can go towards retirement.


Before I learned how to budget, I remember feeling like every time I got a paycheck, I suddenly had a lot of money for about two or three days. Then my bank balance went back down to the “Argh! How am I going to pay X bill?” level that I was accustomed to for most of the month, and I was scrambling to figure out how to meet my financial obligations.

One of the first things I did to get that under control was to start automatically deducting a small amount with each paycheck to go into a savings account. It was only $30 per paycheck to start off, and early on, that savings account was sometimes used as my emergency fund, but the account slowly grew to a point where my $60 monthly contribution was becoming “real” money. I barely felt the loss of $30 when I was flush with a new paycheck, but it built up over time.

If you can automate a certain dollar amount from paycheck to go into your retirement account, you’ll hardly miss it. If you’re company has a matching program, all the better. Even if you can’t yet afford to put in the maximum for matching, you’re still doing better than you would without any money flowing into retirement. Every little bit helps!

Find Something To Cut

Every household budget has some fat that can be trimmed. Whether you are willing to trade in your new car for a used, or are ready to tell your cable company sayonara, there is something that you may have previously considered a need that can be downgraded to a want. The money you free up by doing that can help you achieve a better balance in your financial life, which will make it easier to send more money to retirement.

The Bottom Line

You know that living paycheck-to-paycheck is stressful—and no way to prepare for your future. Finding a way to make your paycheck go farther by having an emergency fund, cutting back on non-necessities, and by automating your savings can all do wonders for your future and current finances.

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Emily Guy Birken

Emily Guy Birken is a freelance writer and stay-at-home mom who is passionate about personal finance. She lives in Lafayette, Indiana with her mechanical engineer husband and her toddler son. She blogs about parenting at The SAHMnambulist and about the funny side of money at Live Like a Mensch.
  • John S @ Frugal Rules

    Great points. I know that lving paycheck to paycheck can be difficult, but I think it just means that you have to be more disciplined it how you save and how your allocate your money.

  • Catherine

    I keep reminding myself of these things, We’re living paycheque-to-paycheque right now and I HATE it. I do my best to make sure, despite all this I transfer a little to an emergency fund first!

  • Jason @ WorkSaveLive

    Living paycheck-to-paycheck was a miserable existence. It’s crazy how things change when you start to get your finances in order. Life becomes so much more peaceful! I think earning some extra income and cutting a few things out of the budget are great ways to add a few more dollars to your retirement contributions!

    • Jason Clayton

      I agree Jason. Budgets allow you to feel in control and really bring peace in the financial area. (no matter how small your budget is)

  • Pauline

    If you are really living paycheck to paycheck, not because of bad money decisions but because you cut your spending to bare bones and there still is nothing left, I think you shouldn’t be saving for retirement. Those accounts are not easy to cash, should an emergency arise. I would wait until I get back on my feet before contributing to retirement.

  • DC @ Young Adult Money

    I think the biggest thing is having some money automatically deducted from your paycheck. It’s the easiest way to save consistently over time and you end up not missing the money as much when it’s automatically taken out.

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