Are you getting a late start on your retirement planning? If so, you have company. According to a recent study from the Economic Policy Institute, the average family between the ages of 44 and 49 has only $81,437 saved for retirement. That number is $124,831 for those between ages 50 and 55 and $163,577 between ages 56 and 61.1 While those numbers might represent a good start, it’s fair to say they’re not sufficient to fund a long retirement.
The good news is it’s never too late to start saving for retirement. You may have to make some adjustments to your plans and vision, but with some discipline and focus, you may still be able to fund an enjoyable retirement.
Below are four tips to get you started. If you haven’t implemented these steps or started your planning, now may be the time to do so. The longer you wait, the more challenging your retirement might be.
Estimate your savings goal.
You wouldn’t plan a road trip without knowing your destination. The same should be true for your retirement plan. Before you can develop a strategy, you need to know where you want to end up. In the case of your retirement plan, your destination is your savings goal.
Start by estimating your annual spending. While you can’t precisely predict your annual spending in retirement, you can probably generate a range or ballpark figure. Then calculate any income you can count on in retirement, such as Social Security or pension benefits. If your income won’t cover your expenses, you have a gap that will need to be covered by distributions from savings. Your target should be a savings balance that’s large enough to safely generate your needed income.
Downsize your plans.
Since you’re getting a late start, you may find that your funding gap is so large that it would be nearly impossible to save enough money. Another way to eliminate your savings gap is to adjust your retirement plans. If you reduce your annual spending needs, you can similarly reduce the amount needed to fund your lifestyle.
For example, you could consider downsizing into a smaller home. That could reduce costs such as your mortgage, maintenance, utilities and more. Look at things like dining out less or scaling back your travel plans. Even small spending changes can have a big impact over time.
Consider supplemental income.
Retirement is supposed to be a time when you don’t work at all. If you’re off to a late start on saving, however, you may need some level of extra income. Fortunately, there are plenty of opportunities to work that still allow you to enjoy the freedom and flexibility of retirement.
You could look into a part-time job. Or you may even consider a seasonal job, like working at a golf course or a nursery. That way, you’d still have part of the year in which you don’t work. If you have a special skill or talent, consider freelance work as a coach, teacher or consultant.
Maximize your contributions.
Finally, the most important step you can take to funding your retirement plan is to save as much as possible. Make use of tax-deferred accounts like a 401(k) or an IRA. If you are under age 50, you can contribute up to $18,500 to a 401(k) in 2018 and as much as $5,500 to an IRA. If you are 50 or older, you can contribute an additional $6,000 to a 401(k) and $1,000 to an IRA.2 These additional amounts for older workers are called catch-up contributions, and they’re designed specifically for people who are off to a late start.
Ready to catch up on your retirement savings strategy? Let’s talk about it. Contact us today at Financial Solutions Group. We can help you analyze your goals and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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