Social Security won’t pay you enough money to enjoy a comfortable retirement. Right now, the average recipient gets a little over $1,500 a month, which translates into $18,000 and change each year. Since that’s probably not enough for you to live on, you’ll need income sources outside of those benefits to stay afloat.

If you’re among the lucky workers who have access to a very generous pension, you may be reasonably set. But chances are, you’ll need to pad your senior income by socking money away in a dedicated retirement savings plan.

Smiling man at laptop


Of course, funding a retirement takes discipline and sacrifice. And the latter isn’t an easy thing to grapple with, especially if you’re on a limited income.

But here’s some good news: You don’t actually have to part with a ton of money to grow a decent amount of retirement wealth. All you really need to do is follow a couple of basic rules.

1. Give yourself a long savings window

The earlier in life you start funding a retirement plan, the more time your money will have to grow. That’s why it pays to start saving for your senior years even when they’re many decades away. If you wait until your 40s, for example, to start socking money away to use in your 60s, you’ll give your money 20 years to grow when it could’ve had 40.

2. Invest your savings aggressively

A lengthy savings window is particularly useful when your investments are generating a solid return. And to that end, stocks are your friend. Though it’s true that stocks can be extremely volatile, when you’re talking about saving money over what could easily be 20, 30, or 40 years, there’s less to worry about because you have time to ride out market downturns and come out ahead.

You can retire on just $300 a month

Currently, IRA contributions max out at $6,000 a year for savers under 50 and $7,000 a year for those 50 and over. With 401(k)s, these limits are set at $19,500 and $26,000, respectively. But you don’t need to part with that much money to retire with a decent chunk of wealth. In fact, if you follow the above rules, you may be able to retire quite comfortably on just $300 a month, as the following graph highlights:

Graph showing retirement savings plan growth over time


As you can see, saving $300 a month over 40 years will leave you with $718,700 in total savings if your invested retirement plan generates an average annual 7% return. But since that return is a few percentage points below the stock market’s average, it’s quite a reasonable assumption.

Therefore, if you find the idea of saving for retirement daunting, you may want to take a step back and recognize that you don’t necessarily need to part with a quarter of your paycheck or more to amass a decent chunk of wealth. Sure, the more money you’re able to save for your senior years, the better, but if you start early enough and invest wisely, you can do quite well for yourself with modest contributions.