Can you save for retirement when you're barely getting by?

Retirement isn't the only thing competing for your money, and it shouldn't always win out over other things. Knowing the order to spend your money will help.

Your order of operations

• Build a starter emergency fund. Aim for $500 to $1,000 at first. This keeps a car repair or medical bill from turning into high-interest debt.
• Grab any employer match that you can. If your job offers a 401(k) or similar plan with a match, contribute at least enough to get the full match.
• Pay down high-interest credit cards and payday loans.
• Grow your emergency fund. Work toward a few months of essential expenses in case you’re out of work for a while.
• Save more for retirement. Once the basics are covered, increase what you put away, a little at a time.

You can work on several of these at once. The point is not to skip the match, and not to save for retirement while a credit card balance grows at 29%.

Why do small amounts matter?

Money in a retirement account grows over time, but if you want to get the most growth, you need to start early. Your earnings start earning their own earnings, an effect called compounding.

Here's what that can look like. If you save $50 a month for 30 years and your investments grow an average of 6% a year, you'd end up with about $50,000, even though you only put in $18,000.

Starting with even $20 a month creates the habit. You can bump it up it when you get a raise or pay off a debt.

You may get free money for saving

• Employer matches: Lots of employers add money when you contribute. A common match is 50 cents for every dollar you put in, up to 6% of your pay.
• The Saver's Credit: If your income is modest, you can get a tax credit worth 10% to 50% of what you put into a retirement account, up to $2,000 per person. Currently, it's available if your adjusted gross income is up to $40,250 if you're single, or $80,500 if you're married filing jointly.
• The Saver's Match: Starting in 2027, the Saver's Credit will be replaced by a direct federal deposit of up to $1,000 a year into your retirement account.

Worried about needing the money?

Planning for retirement is anything but stress-free. You can offset that worry in a few ways:

• Roth IRAs are flexible: You can take out what you put into a Roth IRA whenever you want without paying taxes on it or dealing with early withdrawal penalties (except for what your money earned).
• Small emergency withdrawals: Many workplace plans now let you take up to $1,000 a year for a “personal emergency? without the 10% penalty. You'll still owe income tax unless you repay it.
• Benefits may not be affected: SNAP food benefits don't count most retirement accounts as savings. Rules for other programs vary, so ask before you withdraw.

Does it make sense to wait?

If you're behind on rent or utilities, have no emergency cushion at all, or are juggling high-interest debt, focus there first. Retirement saving is important, but stability today matters more. Come back to it as soon as you can, even if it's just a few dollars.