Saving for a Rainy Day – Part II – Now that we’ve discussed how to create an emergency fund…
it’s time to address retirement savings.
I came out of the “recession” in the worst possible shape. I lost everything, including my marriage. At the time, I was unemployed and we had just filed bankruptcy. We had already lost two houses to foreclosure with another two losses on the way. It was the perfect storm, partially due to the situation in the marriage and partially due to the tough economic situation. I can’t fully blame either.
The reality was, I had to completely start over. The only assets I had were a small IRA (and I’m talking around $2,000) and a five-year-old Honda. Luckily, the car was paid off.

This was a very scary place to be at 47 years old with a pre-teen to provide for. I learned quickly that I had to do whatever was required to get back on my feet. Eight years later, I am still struggling to figure out how to have enough saved to ever retire. But I’m determined to try and keep trying until I get it figured out.
This is the second part of savings. We covered an emergency savings in the first article, now let’s dig into long term savings.
If you work for an employer who provides a 401(k)-investment account, then the limits are different. I would encourage you to contribute, at the minimum, the amount the employer will match if one if offered. For example, say your employer will match your contribution up to 3% of your salary. If you contribute 3% of each paycheck, your employer will add an additional 3% to your 401(k).
This is essentially free money, so please, take full advantage of it.
However, if you are self-employed, or your employer does not offer a 401(k), you should set up an IRA (Individual Retirement Account). The advice is basically the same as for your emergency savings except there are limitations on what you can contribute to an IRA tax-free. You will want to max out your tax-free contribution, if possible.
This will help reduce the amount of income you are taxed; thus, you will be paying yourself instead of Uncle Sam.
If you are 50 or under, then you can contribute up to $6,000. If you are over 50, then you max out at $7,000.
The math is easy. Divide whichever amount applies to you by 12 and you’ll know how much you’ll need to contribute per month.
- $6,000 / 12 = $500
- $7,000 / 12 = $583
Review your monthly budget again and figure out how you can afford to slice off the needed amount for your retirement savings.
This may initially feel impossible. I know.
Paying for food, shelter, transportation, and other basic needs must come first. Buying luxury items should be curtailed.
Living for the NOW feels good right now. But it won’t feel so good when you can no longer work and have nothing to live off.
This is the tough love part of our conversation. I know that having nice things feels good. And, I’m not saying wear rags or don’t cut your hair. I’m encouraging you to set your priorities.
Making your own retirement a top priority is putting yourself first.
This may mean making tough choices. Start by combing through your budget looking for any luxury items that you can cut back on. Allocate as much as you can NOW for your retirement account and set a goal of maxing out your tax-free contribution as soon as possible.
My financial advisor says this to people when they are first starting out and are scared about making the payment to contribute as much as feels good to them: When it starts hurting, and you resent having to make the payments because you’re short somewhere else, then it doesn’t end up working, so she suggests you contribute what feels good and reevaluate in a few months.
One option is to set the monthly as high as you reasonably can, but if you aren’t able to reach the necessary amount to attain your max, then look for other opportunities to add to it. For example, you may get a tax refund or a bonus. Whenever you receive an unexpected chunk of change, add that to your retirement contributions. You may be able to reach your annual goal even if your monthly contribution falls a bit short.
Just getting started is half the battle. And once you do, it becomes a habit. Soon you will
find the challenge of reaching your goal will become more important than spending your money willy-nilly.
Accept that you need to do this for yourself. You need to do it now, and if you continue to do it regularly it will become easier and easier. Make yourself the priority.
Of course, if you’re like me, and are starting this plan later in life, a retirement account alone isn’t enough. I can max out my annual contributions from now until the government says I must stop and start taking money out (72 for a regular IRA), but it won’t be enough to survive on.
That doesn’t mean don’t do it. It means see it as part of the overall plan and start looking into other ways to invest that will help you reach your long-term retirement goal.
This is one piece of the puzzle, and you may need others as well. I would encourage you to find a financial advisor that you trust. Work with her to figure out the best combination of options for you.
If you would like a referral to a great financial advisor, please contact me and I will give you the contact information for my gal. She’s awesome. Or ask a trusted friend, who they trust their money to. Find someone you feel good working with who won’t judge or make you uncomfortable for asking a lot of questions. Then ask a lot of questions.
Taking charge of your long-term financial life plan is empowering. The sooner you do it, the sooner you will be stepping into your power and driving your life where you want it to go.
Sherry Lutz Herrington is the owner of Sherrington Financial Fitness, a business consulting and accounting firm specializing in strategic business planning and solid financial accounting for businesses. She is also the author of Strong Women Thriving (https://strongwomenthriving.com/), a blog which focuses on empowering women to be financially savvy, particularly after experiencing financial abuse. Sherry is currently writing a new book that both shares her personal story and addresses financial abuse. She can be reached at hello@strongwomenthriving.com. Join our FB group https://www.facebook.com/groups/womensurivingfinancialabuse