More time equals more money: Whether on your own or through employer, save for retirement now

Employees are increasingly left on their own to fund their retirements.

The median net worth of families investing regularly in a 401(k) or IRA-type of retirement savings accounts rose to $443,000 by 2022, but it was just $47,450 for nonparticipating families, according to the Employment Benefits Research Institute (EBRI). Social Security will only provide a fraction of the income you will need to live on once you retire, and the number of U.S. workers whose companies provide full pensions during retirement has plunged to just 15%, EBRI reports.

“It’s scary that nearly two thirds of people actually think they are eligible for a [company] pension when we [experts] all know where that number actually is,” said Peter Kapinos, head of workplace and investment marketing at Empower Financial Services.

Many people, especially low-income workers, don’t know where to start or feel it’s impossible to save for retirement on a limited income, especially with inflation making groceries, gas and energy so expensive. But with a little knowledge, anyone can take steps toward securing a better future, experts said. Here’s their advice on how to approach your retirement saving.

Your workplace might have free “company 401(k) matches” or employee benefits that can ease the job of saving for your later years.

Employers, banks or brokerage firms can also make retirement saving easy by automating your deposits. Once you sign up, they will pluck money from each paycheck before you receive it and plop it right into your tax-deferred retirement savings account.

Automating those deposits with each payday lets you pay yourself first, in essence. The sums accumulate quickly, and depending on your selection, your savings can grow tax deferred, meaning you don’t pay taxes on the money now, just much later when you actually withdraw the funds.

“Just start somewhere. It’s not as bad as you think. And you are not helpless,” said Minneapolis-resident Sarah Auna, who makes roughly $25,000 a year.

The 42-year-old mother of two teens is a self-employed birth doula who recently took a second job to pay the bills and reduce the insane stress of business ownership. Last year, she went on food stamps and, as part of a Hennepin County program, started working with a financial counselor for the first time.

He suggested she enroll in the 401(k) plan offered at her new job. She’s now saving $50 a paycheck toward retirement and even receives a $40 match each quarter from her part-time employer.

Her 401(k) account now has a few hundred dollars.

“It definitely increased my confidence,” Auna said, adding it also allowed her to do what she never thought was possible.

Pheng Lee, who coaches Auna and 55 other low-income clients each month for the Minneapolis-based job-training agency Hired, said incremental saving really does pan out in time.

“Even if you are not making a lot of money, you can still put some money away each month. It’s all about the compounding [interest] piece of it,” Lee said.

Though many of his clients make just $12,000 a year working as Walmart or gas station cashiers, stadium guards and ushers, he tries to equip them with the tools needed to build savings. Some have never had a 401(k) plan before. Others never had a bank account.

“A lot of the time, [retirement planning] is really a foreign concept for them. So it’s really trying to debunk the mystification [by explaining] a dollar here and dollar there and a dollar tomorrow, that’s two and three dollars saved,” Lee said. “It gets that ball rolling. Having them get these small wins is a luxury for them. So many times, they have been told that, ‘There is no way you can do it.’ Our focus is that, ‘You can do it! You are surviving, and that is a win.’”

Many experts suggest before people dive into retirement savings, they do a tiny bit of homework first.

Thrivent financial adviser Mia Erickson coaches teachers, mechanics, service workers and other clients to first review their wages and expenses, then set a budget and find out if their employers offer group health, life and disability insurance at work.

Figure out how much each of these employee benefits will cost you each pay period. Then sign up, if you can afford it, she said. Buying group insurance policies through work can protect you or your family from big expenses later. Premiums are far cheaper when bought through work than if purchased on your own, Erickson said.

After those “first steps,” cobble together an easily accessible emergency fund that can cover three to six months of expenses.

“That way, if something happens, and you need new tires, you need a medical procedure all of a sudden, you can have cash available,” said Emily Irwin, who heads the Wells Fargo Bank Advice Center in the Twin Cities.

With a budget, insurance policies and emergency fund assembled, you are often ready for the next step of planning for retirement, Irwin and Erickson said.

If you work for a company that has a human resources department, meet with it. Ask your HR rep to enroll you in the workplace’s 401(k), Roth 401(k), Simplified Employee Pension Plan (SEP IRA), SIMPLE IRA or Keough plan as soon as you are eligible. (Some employers don’t let you enroll for several months after hiring).

Be wary: These plans have rules. Since they are meant to help you save for a long time, there is a stiff 10% penalty from Uncle Sam should you touch your 401(k) funds before age 59½. And you’ll most likely pay taxes, too.

Still, most financial advisers view employer-sponsored retirement plans as “gold,” especially since many employers match contributions, stashing some of the company’s own money into your account.

It might be 1% to 3% of your salary.

“That’s free money. Think of it like getting an extra paycheck, because that is exactly what this is,” Irwin said.

Don’t fret if you don’t have that luxury. You can still participate in the “save for retirement” game on your own. You can walk into a bank, a credit union or an investment banker’s office and open your own Individual Retirement Account known as an IRA. You will need proof of identification and some money — sometimes as little as $50 — to start the deposit process.

“One thing I also love about these [IRA] accounts is you can start them as soon as you have a W-2 income statement,” Irwin said. “So if you’re someone who [has] a summer type of job or gig work that’s coming in but kind of, maybe, sporadic, it’s still income. [So] you can still contribute to this type of account. That’s a big deal because it lets you start a little bit sooner. And that gives you the ability to have assets compound for a longer period of time.”

Most 401(k) and IRA plan administrators will have a list of investment options you can select. You might decide to put your money in a mutual fund, an “index stock fund” such as the S&P 500 or more conservative offerings such as bonds or certificates of deposits. Some plans offer mixes of all of the above.

The more diversity in your investments, the less risk, experts say. In time, the value of these mutual funds will hopefully rise, giving you a return on your investment.

Some employers also offer 401(k) Roth plans that let you pay the taxes on your savings now. That way, you won’t have to pay taxes later when you are retired and living on a fixed income.

Whatever you decide, be sure to designate beneficiaries by notifying your employer, Irwin said. That way, your family or loved ones can access your 401(k) funds should something happen to you.

Even with all these tools, a recent Allianz Life study found Gen X workers, ages 44 to 59, feel less confident about their finances and worry more about retirement than baby boomers or millennials.

Some Gen Xers haven’t started savings and now are panicked.

“But they are not alone. It’s not unusual,” said Kelly LaVigne, consumer insights vice president at Allianz Life Insurance Company of North America.

He said it’s hard to save while raising a family. But as workers age, “things calm down.” You’ll receive pay raises, pay down your mortgage, do away with student loan debt. You can then save that extra cash.

“Gen Xers are reaching crunch time for retirement planning,” LaVigne said, adding the generation only has six to 20 years left to build up its nest egg,. “That can feel stressful. But by preparing now, they can create a strategy that will help them seek their ideal retirement. The good news is that it is never too late to prepare for retirement. You can wish you started sooner, but you’ll never wish that you waited longer.”

LaVigne suggested looking for free workshops about retirement planning. Libraries, the Wilder Foundation, Local Initiatives Support Corp. (LISC) and counties often host free “adult education classes” that teach the basics of retirement planning. Many financial planners host free workshops and mail postcard invitations to neighbors, coffee shops, book clubs or others.

“So watch your mailbox. Don’t just throw out your junk mail,” LaVigne said. “If you want to learn this stuff under no pressure, that is one of the best places to go.”

Fidelity, Edward Jones and Ameriprise as well as banks, credit unions, insurance companies and others often have free online tips, worksheets and suggestions to help nonclients. For example, Thrivent has “Money Canvas” and Thrivent Member Network websites.

“Many times people are very intimidated to walk into a financial office. For those people who are not ready to sit face to face and lay bare their financial situation, people can use websites or attend online webinars and seminars,” said Erickson from Thrivent. “For a lot of people just getting started, that is a comfortable first step that is not so intimidating.”