As a single, self-employed licensed mental health counselor, I’ve long let planning for retirement fall to the back burner. I’m strapped with covering a number of high expenses as a business owner, and I also don’t have the benefit of a workplace retirement plan. Even in my previous job, when I did have access to a retirement plan, it didn’t come with an employer match, so I never opened it. While I currently have a Roth IRA, I barely contribute to it these days because I’m trying to pay off both student loans and credit-card debt. And I’ve always figured that I had to choose one or the other: pay off that debt or save for retirement. But according to financial professionals, it’s possible to take steps toward both goals at once.

I recently had the chance to discuss my financial situation and goals with Fidelity Investments Vice President, Financial Consultant Ryan Viktorin, CFP,  and Vice President of Retirement and College Products Rita Assaf, and they helped me to create an efficient plan for paying off debt without having to neglect saving for retirement. The plan includes tactics for both shrinking the overall amount of debt I need to pay and how long it’ll take me to do so, as well as maximizing how much and how quickly even my small retirement contributions can grow (more on that below).

Before diving in, however, Viktorin tells me that it’s essential that I get a true sense of what my take-home pay really is, after I pay my key expenses (including things like rent, food, my car payment, my student-loan minimum, and my credit-card minimum) and to not pass judgment on the amount spent or left over. “Whenever we’re looking at expenses versus income, it’s easy to think, ‘Well, what should my expenses be?’ or ‘Oh, I shouldn’t have bought that latté,’” she says, “but instead, just take an objective lens to it, and map out where the money is currently going.”

“Take an objective lens [to your personal expenses], and map out where the money is currently going without judgment.” —Ryan Viktorin, CFP, Fidelity Investments VP Financial Consultant

Assaf compares this mindset to the one you’d use in meditation: “Just like a meditation teacher might tell you to observe your thoughts but not to judge them, you want to approach budgeting without judging what you could or should have done differently.” In fact, observation alone can be eye-opening, Viktorin tells me: Maybe, for example, by taking an honest look at my expenses, I’ll find easy things to shave off that won’t have that big of an effect, if any, on my lifestyle (like, say, a subscription service I’m already not using).

As uncomfortable as it seems to outline all of my personal expenses, I know it’s an important exercise that’ll help me to be realistic about what money I can put toward my financial goals each month. To then maximize my ability to both pay off debt and save for retirement (rather than choosing one or the other), Viktorin and Assaf suggest I take the below steps.

1. Focus on paying off high-interest credit-card debt first (and minimize that interest)

Priority number-one for any additional funds I have leftover after paying my expenses each month is my credit-card debt, Viktorin tells me.

It’s not that I need to ignore my student-loan debt—the minimum payment is still a part of my monthly expenses—but just that I should allocate more money toward paying down the credit-card debt more quickly. Also, this credit-card debt carries a much higher interest rate than my student loans, meaning that the total is growing more quickly, too. (In the past, I’ve always kept it low or have been able to pay it off entirely, but last year brought new expenses, including a new car, and inflation has made managing it all more challenging.)

To that end, Viktorin also recommends that I consider switching my credit-card balance to a card with a zero-percent interest rate (or at least a lower rate than my current one). “Even if there’s a small percentage that you have to pay to make that balance transfer, it may be well worth it to keep a high interest rate from continually eating into the amount of debt you’re paying down,” says Viktorin.

2. Keep money in a high-yield savings or money market account

“A year ago, it didn’t really matter where you had your cash because nothing was paying any interest,” Vikorin tells me, “but that whole picture has since changed.” Right now, some of the highest-yield savings and money market accounts (aka savings accounts that can also offer debit-card and check-writing privileges) have between 4 and 4.5 percent interest rates, which is significant, she says. It’s important to stay abreast of changes in interests rates, though, given that what’s high yield right now may not be in the future.

3. Consider setting up a SEP IRA to save for retirement

Viktorin and Assaf also suggest that I consider setting up a SEP IRA and contributing to that instead of my Roth IRA. Since I’m self-employed, I can make tax-deductible contributions that grow tax-deferred, helping me reduce my taxable income. It also has a much higher contribution limit than a Roth IRA does. 

Contributing pre-tax dollars will also help soften the impact of this expenditure on my bottom line, Assaf tells me. “You’re pulling the money out of your gross pay before the final amount hits your bank account,” she says. In this way, the retirement contribution will function more like a part of my monthly expenses than an additional burden.

Assaf also assures me that the amount I choose to contribute can be very small and still have a measurable impact down the line. “Even if you’re putting, for example, $50 or $100 into a SEP each month, that could be thousands and thousands of dollars by the time you’re ready to retire, perhaps in the year 2060,” says Assaf. “Small steps now have the potential to turn into big strides later.”

4. Remember, you can actively invest your SEP IRA

To the last point above, Viktorin also reiterates that I do need to actually invest my SEP IRA, which is a step that many people forget. “People will be contributing money to an IRA, and I’ll ask them what they’re investing it in, and they’ll tell me… the IRA,” says Viktorin. “They don’t realize that the money in there could be invested.”

In fact, she tells me, there’s really no sense in me contributing money to an IRA and having it sit there in cash like it’s a savings account “because you can’t even touch it until you’re 59 and a half years old,” she says. “Given that super long time horizon, you can actually afford to be more aggressive with your investing strategy now.”

This isn’t a suggestion that I day-trade my IRA, but just that I consider my timeline for retirement and, from there, gauge my comfort level with risk-and-reward scenarios and gauge an investment strategy accordingly. One of the most common options for that is a target-date fund, says Viktorin. “This is a one-size-fits-most investment where you select a fund aligned with your target retirement date. The fund gradually and automatically adjusts the investment mix of stocks and bonds over time, taking on more risk when you are far from retirement and less risk when you approach retirement.”

By investing my SEP IRA this way, I can have confidence while knowing that the money I contribute is invested appropriately to help meet my retirement savings goals.

*As told to Erica Sloan