By Chandra Orr

November 19, 2010 5 min read

In the current economy, finding spare funds for retirement investing may be a challenge, but it's more important than ever to keep plugging away at that nest egg.

"If anything, the financial downturn of the past few years has made investors recognize the importance of diligently saving for retirement," says David Walters, certified financial planner with Palisades Hudson Financial Group. "People no longer view their homes as piggy banks and have refocused on traditional savings. Further, periods of distress and poor economic environments are historically the best times to invest."

The goal is to buy low and sell high. Markets may be volatile in the short term, but time is on your side.

"Time is an investor's best friend. Compound growth is a powerful tool, and even saving a little bit now, when times are tough, will make a big difference as those savings are allowed to grow over a longer time horizon," Walters explains.

But how do you save if your budget already is stretched to the max? It takes diligence and discipline, but even those living paycheck to paycheck can find small ways to stash away money for retirement.

*Adjust Your Expectations

In general, Americans have less money to invest and receive lower earnings on those investments than they did 10 years ago, so it may be time for a reality check.

"Get over the old stuff. The 1990s aren't coming back any time soon. Single-digit returns are the norm now," says certified financial planner Chris Cooper, president of Chris Cooper & Co.

That means you probably won't make millions on your investments or live out your golden years in the lap of luxury, but you still can have a comfortable retirement. Establish realistic expectations and you'll be better prepared psychologically to adjust your current lifestyle and budget so you can afford to save more.

*Live As If You're Already Retired

Retirees typically live on a fixed income, which means cutting back on nonessentials and sticking to a budget. Give it a go now to free up extra funds for later.

"We must lower our standard of living to a more realistic one," Cooper says. "Lower your current lifestyle to what you will be living on in retirement. Then you can save and invest for the future."

Uncover the drains on your disposable income. Do you really need the latest high-tech gadget? Do you spend a lot on eating out? Maybe you can cut back on your clothing expenditures. Chances are you can funnel some of that money into your nest egg.

"Run your household like a business," says financial planner Ornella Grosz, author of "Moneylicious: A Financial Clue for Generation Y." "No matter the economic environment, following the outflow of your money is critical. You will discover where you expend your hard-earned dollars and recognize where you can cut your spending."

*Invest Whatever You Can

According to conventional wisdom, you should set aside 10 percent of your income for retirement savings, but even a little bit helps.

"Even if you can contribute with a small amount of money, it's important that you continue," Grosz says. "As your financial circumstance improves, you will be in a better position to contribute a higher amount to your retirement investments."

Thanks to compound interest, slow and steady wins the race, but you must be diligent in your savings.

"Pay yourself first by treating retirement savings like a monthly bill," Walters says. "Find a way to do it, even if it means saving small amounts until you have more to save. And if you're not already doing so, take advantage of your company's 401(k) matching program. Not doing so is turning down free money."

*Keep a Close Eye on Your Portfolio

Review and rebalance your investments once a year, and don't be afraid to take some risks, Grosz says. "Don't be too conservative with your investments if you have more than 10 years to invest. Having a couple of decades to invest allows you to take advantage of time and compound interest."

Keep an eye on investing costs, as well. Broker fees are common, but the money you spend on investing is money you could be putting in your nest egg.

"If you want your contributions to go even further toward retirement, then choose investments with low costs, such as index funds," Grosz says. "Costs do matter. Costs can decrease your investment returns and increase your losses."

In other words, what you get to keep is just as important as what you make.

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