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Do you feel like you are behind in saving for retirement? Or do you wonder if there’s more you can do to prepare for that day? Be encouraged, it’s always a good time to start saving! This article explores practical tips for taking the next step towards making retirement a reality.
Many retirees today are redefining the “golden years.” Forget about endless days of leisure. Retirees seek adventure, travel, and new business pursuits. While these changes may redefine retirement, will retirees be able to finance their plans? Today, many people age 50 and older have not begun to save for retirement or have yet to accumulate sufficient funds.
For people in this age group facing an underfunded retirement, it’s not too late to take charge. There are actions to take today to get on the right track. Here are some ideas:
What’s it going to take? First, estimate how much money will be needed in retirement. Once that’s done, start working towards meeting that goal. A good rule of thumb is to consider needing about 60%–80% of the current annual income in retirement. A financial professional can help assess the right amount needed for the future.
Maximize your contributions. When employers offer a retirement plan, contribute as much as the law will allow. Many employers also offer a company match, so be sure to contribute enough to claim this “free” money, which can add up over time.
Create a spending plan. In other words, make a budget. Many people think a budget is restrictive, but look at it this way, saving now may help afford dream adventures later. To start, it is important to pay down debt and avoid accruing new debt. Next, examine spending habits and replace some of the discretionary spending with saving. Saving even $20 more per week is a big step in the right direction.
Take initiative. Besides contributing to employer’s plans, opening a Roth IRA can save even more for the future. Contributions are made after taxes, but earnings and distributions are income-tax free, provided the account is at least five years old and the account holder has reached age 59½.
Hang out your shingle. Many people hope to start their own business in retirement. Why wait? By starting entrepreneurial efforts now, the business has potential of being in full swing by the time retirement comes around. And any profits between now and then can be added to savings!
Consider downsizing. Homes generally increase in value over time, and with children at or near adulthood, is that big house still needed? Selling now and moving to a smaller, more affordable location may help capture additional savings from the sale.
Reconsider your retirement age. For those who want to cushion their retirement savings, consider staying on the job longer. Some people actually leave retirement to reenter the workforce because they feel more fulfilled when they are working. Others seek part-time work, consulting, or entrepreneurial endeavors. Such options may help postpone spending down savings.
Regardless of which options you choose, you can benefit from time and compounding interest. Every year that your savings remain untouched allows more time for growth. It is never too late to start preparing for your future! So, take the time now and consult a financial professional to help you get on track saving for your retirement.
