Getting closer to retirement can be both exciting and scary. It’s more on the scary end of the spectrum if you’re about to retire but don’t have enough saved. Roughly 6 in 10 people say they have less than $25,000 in total savings and investments for retirement, according to the Employee Benefits Research Institute and Greenwald & Associates Retirement Confidence Survey. Furthermore, 36% say they have less than $1,000 saved. Many respondents are also unsure of how much money they will need to live comfortably during their golden years. About 44% said they haven’t taken the time to calculate their retirement needs.
If this sounds like you, it might be possible to get back on track with your retirement savings. With focus, persistence, and help from a financial professional, you can get closer to being able to retire. Here are four tips for catching up with your retirement.
1. Work longer
Chances are, you’ll be working longer than you had anticipated. The most recent TransAmerica Retirement survey revealed that 1 in 5 workers (20%) plan to continue working for as long as possible in their current jobs or until they can no longer work. Furthermore, 37% say they expect their job to be an income source during retirement. Additional expected income sources include Social Security (69%), retirement accounts (68%), other savings and investments (45%), defined benefit plans (23%), home equity (13%), and inheritance (11%).
“American workers’ vision of transitioning into and working in retirement sounds like a practical approach that can bring income and benefits, address savings shortfalls and provide opportunities for staying active and involved,” said TCRS president Catherine Collinson.
2. Utilize catch-up provisions
If you are age 50 or older by the end of the year, you can make annual catch-up contributions. You are allowed to make catch-up contributions to a traditional or Roth IRA up to $1,000 each year. The IRS says IRA catch-up contributions are due by the due date of your tax return (this does not include extensions). Furthermore, if you have at least 15 years of service you may be able to make additional contributions to a 403(b) plan in addition to the regular catch-up. You are also allowed to make catch-up contributions to a 401(k) plan up to $6,000 each year.
“If it’s been awhile since you’ve increased your retirement plan contributions, do not delay. Do it now. Most likely, if you increase your 401(k) contribution a few percentage points, you won’t feel it in your paycheck, but over time, you’ll see a huge impact down the road. Start by increasing it a few percentage points in the short-term, and then work on increasing that percent every quarter going forward,” said Certified Financial Planner Jeff Rose, CEO of Alliance Wealth Management LLC, founder of the blog Good Financial Cents, and author of the book Soldier of Finance.
3. Look for budget leaks
Take a long, hard look at your spending habits. You can do this by keeping track of everything you spend for at least 30 days. This exercise will show you exactly where you need to cut the fat.
“Are there any leaks in your budget where you’re spending money on items that have no significance to you and your retirement future? I’ve had many clients identify several hundred dollars per month that they could reduce in expenses and then reapply that to their retirement savings,” said Rose.
4. Reevaluate insurance needs
Also take some time to evaluate your insurance. There’s a chance that you might be paying too much for some of your insurance. You might even be overinsured.
“One of the most common areas that I see people overpaying is insurance. Now, this could be life insurance, health insurance, property and casualty insurance — all types of insurance. The most common reason I see this is because of the headache that goes along with researching how to save money. In my own personal life, we’ve been able to identify saving $100 a month just by reevaluating our life insurance, health insurance, and our auto and home insurance every couple years. While it might take a little bit of time, it’s time well spent,” said Rose.