More than 30% of workers in America ages 45-54 report having saved less than $25,000 for retirement, according to the Employee Benefit Research Institute. It gets more dramatic: more than 25% of those who are 55+, say they have even less than $25,000 saved. If you fit into any of these categories, you are not alone. However, you do have some significant work ahead of you.
CNN’s recent story, “3 ways to recover from a late start on retirement planning,” says that your situation isn't hopeless. You still have time to significantly improve your retirement prospects, if you begin taking serious steps now. Consider the three most important things you need to do:
- Start saving! You need to make a major course correction in your finances that will mean major lifestyle adjustments. If you do make the commitment to save, you can still put together a pretty sizeable nest egg in the later part of your career. Look at doing most of your saving in an employer-sponsored plan like a 401(k). It has tax advantages, generous contribution limits ($18,500 this year, plus a $6,000 catch-up contribution for people 50 and older) and makes saving easier by automatically transferring money from your paycheck to your account. If you don't have access to a 401(k), you can start an IRA, which allows you to deposit $5,500 a year, plus an extra $1,000 for people 50 and older. The sooner you start and the more you put away, the better your odds of having a secure retirement.
- Keep working. In a recent study titled "The Power of Working Longer," retirement researchers found that delaying retirement and continuing to work can be one of the most effective ways of raise your post-career standard of living—and can be better than increasing your savings rate. Staying in the workforce lets you delay claiming Social Security. You can then qualify for a bigger monthly Social Security check in the future. You’ll also have more years to save for retirement, and your nest egg has more time to grow before you use it.
- Be open to new ways of building security. Depending on how far behind you are, it is possible that you simply may not be able to work more years or to save enough to catch up. If that is the case, you’ll need to be flexible and resourceful. You may need to sell your home and move to a smaller place, or to move to a region of the country with a lower cost of living. You might need to take out a reverse mortgage or get a part-time job that won’t be too physically taxing.
Reference: CNN (June 21, 2018) “3 ways to recover from a late start on retirement planning”