As you approach retirement, are you getting nervous about how much you’ve saved – or haven’t saved – to live comfortably for the rest of your life after you retire? If you’re worried you haven’t saved enough for retirement, you’re not alone.
Around 22% of Americans have less than $5,000 saved for retirement, 15% have no savings at all, and more than half (56%) of Americans don’t even know how much they’ll need to retire comfortably, according to Planning & Progress 2019, a study by Northwestern Mutual.
Your future doesn’t have to be all doom and gloom, though. Even if you’re behind on saving for retirement, it may not be too late to create a better retirement for you and your family.
Want to keep up with more financial news? Click here to sign up for our free newsletter.
1. Make catch-up contributions
Once you’re 50 years of age or older, you can start making “catch-up contributions” to some retirement accounts to increase retirement savings. Catch-up contributions up to $6,500 annually in 2020 may be permitted on 401(k) (other than a SIMPLE 401(k)), 403 (b) or SARSEP plans.
You’ll have to comply with other IRS catch-up contributions, too. IRA annual catch-up contributions are limited to $1,000 until 2020. A SIMPLE IRA or a SIMPLE 401(k) plan may permit annual catch-up contributions up to $3,000 until 2020.
2. Increase employer match contributions
If you’re not taking advantage of your employer’s 401(k) match, you’re throwing away free money you could squirrel away for retirement. Even if you’re already participating in your company’s 401(k), consider increasing your contribution to meet the annual limit of your employer’s match contribution.
That way, you can build retirement savings at a faster pace, with your employer’s assistance.
3. Consider taking more investment risk
Not everyone is comfortable with taking more risk with their retirement account’s asset mix. However, if your retirement savings is not on track to offer what you’ll need to meet retirement goals, it may be time to think about increasing risk to get a higher return on investments.
Talk to your financial advisor or retirement planner to find out if adjusting your retirement account investment asset mix may help boost your retirement savings balance.
4. Work longer
Few people want to work for the rest of their lives, but not everyone is financially able to retire at the traditional retirement age of 65. Maybe you once planned to retire at an even younger age but are having second thoughts due to the rising cost of premiums you’ll pay before Medicare kicks in at age 65. Working longer may be the answer to your retirement savings quandary.
One reason to wait to retire is that the longer you delay collecting social security benefits, the larger the check you’ll receive each month. If you have health insurance through an employer, that’s another argument for delaying retirement, since health insurance could be a costly expense. Working a year or two longer also gives you more time to add to retirement savings.
5. Become more frugal
Cutting expenses is no fun, but neither is an impoverished retirement. What if you cut back now on a few luxuries and other expenses that your current income allows so you could sock away more every month for retirement savings? For example, you may be able to cut your grocery bill in half by shopping at a discount grocer or using coupons.
How much would you save if you got rid of cable and subscribed to a couple of streaming services instead? What if you got one massage a month instead of two or went an extra week between haircuts? Commit to taking any money you’d have otherwise spent and depositing it in savings instead.
6. Retire to a less expensive place
The retirement income you’ll need to barely squeak by in one city may allow you to live far better in a town or city with a lower cost of living. If you want your retirement savings to stretch further, think about moving to a more affordable region.
For example, the most expensive areas in the U.S. to live are Hawaii, Alaska, the Northeast and the West Coast, according to the third-quarter composite cost-of-living index at the Missouri Economic Research and Information Center, where you’ll find the annual cost of living in each state. The least expensive regions are Midwest and Southern states.