The marathon to retirement is long, and finally you can see the finish line just around the corner. But are you finding yourself unprepared for this major transition? In order to enjoy the fruits of your labor and achieve a regret-free retirement, it’s important to prepare for all aspects. Without contest, the most important factor to consider is income. In retirement, you will have three main sources of income: your retirement plan, savings and investments, and Social Security. A solid retirement plan focuses on the first two and uses Social Security as a backup.
According to a 2019 Bankrate survey, 21% of workers haven’t saved any money for retirement (or anything, for that matter!). (1) That’s 1 in 5 Americans!
If you’re one of these people, don’t panic. There are ways you can catch up for retirement in a hurry. It just requires a little strategic planning on your part. Check out these 5 ways to catch up for retirement today.
1. Save, Save, Save
Yes, it’s obvious, but it must be said. Identify ways to decrease your spending, increase your income, and eliminate debt. To decrease spending, look over your budget and cut out items you don’t need. I recommend even cutting items you think you need. This could be cable TV, a monthly house-cleaning service, or even your car (if there’s reliable public transportation in your area).
Increasing income may seem out of reach, but it’s the quickest way to save more money for retirement. Here are a few side-hustle ideas to get you started:
- Ask for a raise at your current job.
- Rent your spare room on Airbnb.
- Walk dogs on your lunch break through Rover.
- Drive for Uber on the weekends.
- Use your expertise to build a profitable consulting business.
Once you’ve decreased your spending and increased your income, use the extra money to pay off debt. Debt destroys your financial goals—especially high-interest consumer debt. Eliminate it immediately.
2. Downsize Or Relocate
As you near retirement, your housing needs may look different than when you were raising a family. Downsizing your home is a great way to tackle consumer debt and prepare for retirement. Having a smaller yard to maintain and a smaller house to clean can add up to huge savings in the long run. Not to mention it’ll be more practical as you age.
If you currently live in an expensive city, you could save even more by moving to an area with a lower cost of living. The income from selling your home would instantly boost your savings and your day-to-day expenses would be cheaper.
3. Catch-Up Contributions
If you’re 50 or over, you may be eligible to make catch-up contributions to your retirement plan. The maximum amount of these contributions depends on the type of retirement plan you have.
Here are some catch-up contribution limits for 2020: (2)
- $6,500 for 401(k), 403(b), SARSEP, or governmental 457(b)
- $3,000 for Simple IRA or Simple 401(k)
- $1,000 for Roth IRA
4. Push Back Retirement Date
While this may not seem ideal, you’re able to save and invest more money every year you work. You could choose to stay at your current job a few more years or pick up a part-time job. Remaining in the workforce also gives you the option of delaying Social Security. You can start receiving Social Security at age 62, but your monthly benefits increase the longer you wait to file.
5. Get A Financial Advisor’s Opinion
The bottom line is, if you’ve procrastinated with your retirement savings, all hope is not lost. It’s not an ideal situation, but there are many different strategies to catch up. The important thing is to start now and take advantage of all your opportunities. There’s no time for mistakes, so it’s best to sit down with a financial advisor who can create a personalized plan of attack that covers all your bases.
If you’ve waited too long and need help catching up, we at 1on1financial can assess your current situation and suggest an investment strategy that will help you catch up for retirement in a hurry. To learn more about how we can serve you, call our office today at 909-981-1720 or simply click here to schedule a free 15-minute introductory phone call!
Philip A. Board MSFS, CFS, is a retirement planning specialist and the founder of 1on1financial, an independent comprehensive investment firm serving individuals and businesses throughout the United States. He is also the owner and CEO of Medi-cal Benefits.