Everyone knows that they should be saving for retirement. Yet somehow, as unexpected expenses crop up and we slip up on our monthly budgeting, we can find ourselves falling behind.
The good news is that it’s never too late to start saving - and to possibly even catch up to your retirement savings goal. Whether you’ve never contributed to a retirement savings account, or you just haven’t saved enough yet, you have several options to help get you back on the right track.
Start Saving Now
If you haven’tsaved very much - or anything at all - up until now, it may feel like the small amount you’ll be able to set aside for retirement isn’t enough. However, it’s important to keep in mind that every little bit counts. If you currently have a workplace retirement plan, start contributing a portion of your income each month to that account.
Try to contribute enough so that you earn the company’s matching contribution. This may require you to rework your budget now so that you can have a larger retirement savings later, but having an extra bit of “free” money from your employer in your retirement account can truly help you down the road.
Create a Budget For Right Now
You may feel as though you have plenty of money to get by with what you need for now, but creating a budget will help you to eliminate unnecessary costs and save more. A few things you might consider are:
Create a Budget For Then
Sometimes people are overwhelmed by the idea of saving for retirement because they don’t know how much they’ll need. You can eliminate this feeling by creating a budget for you to follow during retirement, and using that budget to estimate a saving goal. To do this, you can take your current expenses, consider any additional travel or other activities you’ve planned on doing during retirement, and estimate your annual cost of living including all of these factors. Once you reach this number, you’ll be able to set a saving goal.
Make a Plan for When You’ll Retire (and When You’ll Collect Benefits)
A good first step in putting together a retirement savings plan is to know when you plan to retire. If you haven’t saved enough to retire, you might consider holding off on putting in your notice until you hit full retirement age as defined by the Social Security Administration.
According to the SSA, you are eligible to receive full retirement benefits at 67 years old. At 62, you’re eligible to receive 70% of the monthly benefit you would have received based on the years you’ve worked, and at 65 you’re eligible to receive 86.7%. Although your Social Security benefits likely won’t cover your full cost of living during retirement, having a slightly larger benefit each month can help you boost retirement income.
Additionally, working somewhat longer than you had originally planned on can give you more time to build up a retirement savings through your workplace retirement plan or an Individual Retirement Account (IRA). If you choose to grow your wealth through your employer’s 401(k) or other retirement plan, you’re also eligible to take advantage of any employer-match programs they have, which can also help to push the needle on your retirement savings.
Consider Additional Income Streams During Retirement
Sometimes saving isn’t the answer - generating more income is. Many retirees are no longer looking to stop work completely during their retirement. Instead, they look to design an encore career, work part-time, or grow a side hustle business to help generate retirement income.
This is the perfect time to explore your passions and find ways to monetize them. For example, if you’ve always enjoyed writing, you can consider freelancing part-time for a local news outlet, or starting and monetizing your own blog. In some cases, it even makes sense to find a part-time job doing something you enjoy. It’s an excellent way to stay social and continue to find fulfillment after leaving a career you’ve spent a lifetime building.
Find a cause you’re passionate about or a hobby that interests you, and search for part-time work that relates. If you want to stay involved with the local community, working at a local garden center or hardware store is a phenomenal way to increase your retirement income while still staying socially active and connected to the people where you live.
Understand Catch-Up Contributions
If you’re 50 years old (or older), you might be eligible to take advantage of catch-up contribution limits in your employer retirement plan or IRA. If you participate in a 401(k), 403(b), or 457 plan through your employer, the IRS raised the annual contribution limits to $18,500. In addition to this, you can also take advantage of a “catch up” contribution limit of $6,000 a year.
Catch-up contributions also apply to IRAs. You can typically contribute up to $5,500 each year to your IRA, and the catch-up limit for individuals aged 50 or older is $1,000. If you feel you’ve fallen behind in your retirement savings, taking advantage of these catch-up contribution limits can help.
Hire a Professional
At Wisely Advised, we believe that everyone deserves to enjoy a comfortable retirement. We help clients get on the right track to meet their retirement savings goals every day. Together, we’ll develop a savings strategy, guide your investment decisions, and create a budget to follow both for now and for during your retirement to help you stay the course.
Planning for retirement can be stressful, but you don’t have to do it alone. Set up a free consultation today to learn more about our services and how we can help you prepare for retirement.
Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm at www.wiselyadvised.com.
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering comprehensive financial planning and investment advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.