How to Retire on Minimum Wage

The U.S. and all states have laws requiring employers to pay at least a minimum hourly wage to their employees. As of 2013, U.S. employers are required to pay most workers a federal minimum wage of at least $7.25 hourly. Several states, however, require employers to pay a higher minimum wage. Also, while a minimum hourly wage of $7.25 or so may be relatively low it's still possible to retire earning only that amount.

Social Security Retirement

Ideally, you should be saving and investing a portion of your wages for your anticipated future retirement. Also, though Social Security isn't designed to be your only source of retirement income it can act as an effective retirement supplement. In truth, to retire at some point you must be able to combine Social Security with your savings and investments. Fortunately for minimum wage earners, their Social Security, plus what they're able to save and invest can make for an adequate or even comfortable retirement.

Compounding Your Savings

If you hope to be able to retire while earning only a minimum wage, work to become a conscientious saver and investor. Savings accounts pay a low rate of return, or interest, but principal and interest accumulates and compounds over time. Even small savings accounts grow larger over the years with principal and interest growth. Expert financial sites such as The Motley Fool recommend taking your wages and consistently saving and investing at least 10 percent until you reach retirement age.

Investing Your Earnings

Historically, the stock market has outperformed most other investments over a long period of time. Investing some of the 10 percent you're setting aside from your minimum wage earnings can make a great deal of sense. In fact, the annual rate of return for the Standard & Poor's 500, or S&P 500, stock index has been anywhere from 7 to 9 percent. Even if they're small, making steady contributions to an S&P 500 stock index fund could create serious wealth by retirement age.

Planning Your Retirement

It's never too early or too late to begin saving and investing for your retirement. The earlier you can start saving for retirement, though, the lower your continuing contribution amounts will need to be. If you're older and hoping to fund an adequate retirement on minimum wage earnings you must make larger contributions or find investments that pay a higher rate of return or both. Also, if your employer offers a 401(k) or private pension plan strongly consider signing up for that as well.