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Planning for retirement isn’t something people in their 20s, or even their 30s, usually consider. Retirement can often creep up and you realize you’re 40 and have no savings set up for retirement. What can you do to make up for the lost time?
Here are six tips to jump-start your retirement savings later in life.
1. Start Saving
Though it seems too late to start saving, it’s not! Set aside as much of your salary each month as you can within your budget. For example, let’s say you take home $7,800 each month. Put 10% of that, $780 monthly, into a savings account with a compound interest rate. After 20 years, that’s $187,200 with the additional interest, depending on your savings account. It may not seem like a lot to retire on, but every little bit counts.
2. Plan Ahead
What kind of retirement are you looking forward to? If you can live relatively meekly, then your savings can reflect that. However, if you wanting no change in your lifestyle, then your savings will have to correlate. Many Baby Boomers are worried that they will outlive their savings, and some studies suggest that is true. If you make $90,000 a year, then you’ll need approximately 70% of that in your retirement plan, 90% if you make less. You can always consider relocating or downsizing your home to reduce living expenses while still allowing for small luxuries to which you’ve become accustomed.
3. Savings Plan
Many employers offer a retirement savings plan, or a 401(k). If so, contribute as much as your budget will allow. Also, research the plan and find out how much you can put in to receive a full contribution from your employer.
4. Lower Spending
There may be unnecessary expenses in your life that can be eliminated. Budgeting is a great way to find extra money for saving. For example, you may have a fishing boat that you’re still making payments on. You only get out on the water twice a year. Does it make sense to keep making those payments if you aren’t going to reap the benefits? Consider selling unneeded items and saving that profit. Also, reevaluate your insurance policies and cut out any options that aren’t needed. Consider a term life insurance for the time your children are dependent instead of a whole life insurance plan. Just a few cutbacks can bring a lot of savings overall.
5. Pay Off Debt
A lot of adults have debt, whether it be credit card, mortgage, or loans. A 2012 AARP/Demos study found that the majority of older Americans have credit card debt. The interest rate on your debt may be making it impossible to pay off with your monthly payments. Instead, make the largest payments possible until the debt is paid off. You can consolidate your debt to reduce payments and get your debt paid off more quickly. The faster you get your debt taken care of, the quicker those payments can be put in savings instead.
6. Independent Retirement Account
An Independent Retirement Account (IRA) is a viable option for retirement savings. You can contribute to a Roth IRA, which is tax-free to withdraw money for retirement.
Beginning your retirement savings as soon as possible is the best step in getting a nest egg together. It is never too late to start your retirement savings fund; see where you can cut costs and save what you can now.
Plan Your Retirement Right Now
The NewRetirement retirement calculator is an easy to use tool that gives you really great information and a real plan for your retirement. This tool was recently named a best retirement calculator by the by the American Association of Individual Investors (AAII).
