Playing Catch Up with Your Retirement Savings
There is a lot of talk about "retirement readiness" these days, but what happens after you crunch all the numbers? What if you are not as "on track" for retirement as you thought you would be?
Given the option, we would all love to retire early, but things happen along the way that we cannot control. Those things can easily lead us on an unwanted detour. Perhaps your son could not find a job after college, so you covered his expenses for longer than anticipated. Or your daughter decided she wanted to be a perpetual student, so tuition costs were much higher than planned. Maybe you enjoy spoiling the grandkids more and saving less. Or perhaps you are facing a sudden job loss that has curtailed your savings goals. No matter how many “do overs” you have experienced, remember that it is never too late to make adjustments!
Here are some ways you can catch up with your retirement savings:
1. Work a bit longer - Although no one wants to hear this, you may need to consider working a bit longer. That gives your retirement savings more time to grow. Plus, your Social Security benefit will increase 8% each year you delay taking your benefit.
2. Reduce your consumption - Instead of spending the money you are no longer dishing out for your kids' college tuition or insurance, put that money away. Remember to pay yourself first. Ramping up savings in the last few years can make a big difference in what is waiting for you in retirement. Savers age 50 and older may save an additional $6,000 a year in “catch up” contributions over normal retirement plan limits. Plus, as you put more of your income away for retirement, you will adjust to living on less. You may realize you need a little less than you originally thought.
3. Stay invested for growth - Your retirement accounts do not have to be invested entirely in conservative investments at retirement. You always want to have part of your portfolio invested in stocks to take advantage of the long term growth they provide.
4. Find a different kind of work - If you cannot stand the thought of working another day, consider a different type of work or part-time work. Rather than stopping cold turkey, you can slow down just a bit and use that extra income to delay taking Social Security.
5. Consider downsizing - As you prepare for retirement, consider selling your home and downsizing. A smaller property means less to maintain (or nothing at all, if you go the route of condo living), and a smaller - or perhaps non-existent - mortgage.
We have all experienced a few "do overs" in our lives, but strategies exist that can help us catch up on our savings. By taking steps right now to be financially ready to retire, you can ultimately reach your retirement goals.