Are your retirement years fast approaching and your savings not fitting the bill? According to the Employee Benefit Research Institute, 58% of Americans 55 and older have less than $100,000 in savings. There is a smaller percentage (19%) who have $250,000 or more for retirement. A lack of retirement savings seems to be a concern of many, but it doesn’t mean there are no options. While you have lost the magic of compound interest, you still can work hard to fill your retirement coffers. Here are a few ways to save for retirement when starting late.
Know What You Need
The first step to saving for retirement is knowing how much you will need to retire. You don’t need an exact number. That’s too much hassle. Just know where you should be (ballpark) based on your age, how much you make, when you’ll retire, and your savings rate. Don’t waste time with putting this on paper, use one of the great online retirement calculators, like this one.
Understand Where Your Money Will Come From
Most people reaching retirement age will have access to Social Security. As you are calculating how much you need and want for retirement, don’t forget to include your Social Security benefits, along with any pensions or work retirement plans you already have. These will go toward your monthly retirement stipend, so calculate them.
Calculating how much you need will only get you so far when saving for retirement. You need to come up with goals to make up any difference you have between what you will already be getting and what you need to get. Do the math and then come up with goals to reach those savings plans.
Have a Plan
Now that you have defined your goals, it is important to have a plan on how you will get there. A professional retirement planning advisor can help you refine your goals and provide you with concrete steps to take in order to achieve those goals.
Reduce Expenses and Save
One of the easier ways to save for retirement is to reduce expenses. Since you will be living on less (most likely) in retirement, you should start slashing expenses now and getting into the habit of living as you would when you retire. Don’t just slash expenses, but take that money and put it in your retirement savings or use the extra savings to pay down mortgage debt. Housing and food are typically the largest spending categories for most individuals so these are the areas to focus on first. Refinancing for a lower payment or downsizing are the easiest ways to reduce your monthly mortgage payment. And saving money on food is just as easy with these 10 tips to lower spending on food.
Maximize Your Contributions
If you don’t have a 401(k), but have access to one, sign up, and start contributing. This is especially true if your employer matches. Along with a 401(k), you can also contribute to a Roth IRA if you are under the income limits. The maximum contribution is $5,500 per year or $6,500 if you are 50.
Pay Off Debt
The last tip everyone should follow when saving for retirement is to pay off debt. The more debt you have, the less you have for retirement. This applies to any debt, such as credit cards and your mortgage.