Despite our best intentions, many of us Americans find ourselves behind on our retirement savings goals as our retirement age approaches. With the impact of the past year’s market downturn and the rise of inflation, this can be an even greater concern. What can you do to right your financial ship?
Here are 10 concrete actions you can take to improve your progress toward your retirement financial goals.
- Find Out Where You Stand
Before you take actions such as saving more, spending less, delaying retirement or deciding when to begin taking your Social Security benefits, find out what your projected retirement financial picture looks like.
Check out the Vivid Crest Bank retirement calculator, which you can find midway down this page. The calculator will prompt you to provide information such as your current age, projected retirement age, current savings and your projected spending level in retirement. Spend a few minutes on the calculator to get a sense of where you stand and what your retirement savings shortfall might look like.
- Max Out Your Retirement Savings Accounts
If you are in a workplace savings plan and receive matching employer contributions, make sure you contribute at least enough to maximize all of those matching dollars. Otherwise, you’re leaving money on the table.
But don’t stop there. You can challenge yourself to increase your savings contribution by 1% of your salary each year. Another savings boost can come from channeling all of your annual raise to retirement savings.
- Make Catch-Up Contributions
In addition to contributing as much as you can to a workplace retirement savings plan, or on your own in an individual retirement account (IRA), make catch-up contributions. If you are 50 or older, each year you could save an extra $6,500 in a 401(k) or similar workplace plan or an additional $1,000 in an IRA beyond the regular limits as a catch-up contribution.
- Earn Higher Returns
Because risk and return tend to go hand in hand when investing (higher returns typically only come with higher-risk investments), this is a highly personal question. Without having to go too far up the risk ladder, look for competitive returns. For example, the returns on even safe, lower-yielding savings options can vary. So do your homework and make sure a high yield savings account or certificate of deposit pays competitive rates.
However, the biggest payoff could come with assessing your asset allocation and determining whether you might be comfortable allocating a bit more to stocks, for example, and a bit less to lower-yielding assets, such as bonds and cash.
- See Where You Can Trim Spending
Assess your monthly expenses, identify discretionary expenses and challenge yourself. Where could you find $100 a month to repurpose from discretionary purchases to savings so that you can have more fun money available after you retire?
Could you dine out a bit less often or do a takeout instead of a dining out experience, which could save money on alcohol, dessert and tip? Look critically at subscriptions and memberships. What could you do without and not really miss? How about a staycation this year? Where else could you trim?
- Consider Downsizing
Trimming a bit here and there might help but there’s only so much you can save by buying fewer coffees or cutting a subscription or two. For a bigger impact, you might consider downsizing. That could mean moving into a smaller house or condo, which could make sense as a new empty nester. It could mean buying a smaller car. If you are lucky enough to own a second property—do you rarely use it yet pay property tax and utilities year-round? It might be time to sell that.
- Avoid Overspending in Your Critical Peak Earning Years
It’s easy to loosen the purse strings a bit when you’re earning your highest salary. This is especially true if your kids are out of the house and have graduated college. But more money earned could also mean a turbo-charged savings opportunity. This final stretch could make a big difference. Take advantage of a once-in-a-lifetime opportunity to save more!
- Get a Part-Time Job
That could mean a second job when still working full time or moving into a part-time working routine once you retire from your career job. Each of these scenarios is different but the theme is the same: Find ways to earn more money.
A second job could involve long hours, so perhaps that isn’t something you’re ready to do. But staying in the workforce even a few hours a week once you leave your regular job could help you stay socially and mentally active while transitioning into retirement. The benefits can go beyond the extra earnings.
- Delay Social Security Benefits
The biggest payback could come from delaying your Social Security benefits. For every year you wait before claiming benefits beyond your full retirement age, you’ll increase your monthly benefits by 8%. Delay them from age 66, for example, to age 70, and you’ll receive 32% more in Social Security benefits every month as long as you live.
Although you’ll be giving up those benefits for every year that you delay claiming them, the break-even age is roughly 82 if you delay benefits from age 66 to 70. So as long as you live beyond age 82, you’ll be better off for having delayed these benefits.
Conversely, claiming benefits early means permanently receiving less each month. So find ways to delay your Social Security. For most people, this will pay off in the end.
- Negotiate Your Exit
If you are given an offer to take an early retirement package and decide to take it, negotiate the best deal that you can. Explore where your employer might have some flexibility and be your best advocate.
There are so many ways to catch up on your retirement savings. Do what you can and make the most of your remaining saving years.
Allan Kunigis is a financial freelance writer based in Shelburne, VT. He has written about personal finance for more than two decades.
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