Do you have enough saved for your retirement? If you’re like most Americans, your answer is a resounding NO. Although we all know that we should be saving for retirement—and should have been since we were quite young—not many of us have kept up with our retirement contributions over the years.
Like many Americans do with estate planning, we tend to put off thinking about our financial needs in retirement until later in life. And then, as our retirement comes closer, we face the transition with a much smaller nest egg than we might have hoped.
Don’t panic! Being short on your retirement savings is not the end of the world. But you do need to spend some time thinking about how you’re going to catch up. To help you do so, here are three broad strategies that could help you bridge the gap between what you’ve saved so far and what you’ll need after retiring.
“Saving more” may sound obvious, but there are legal tools you can use to do so that you may not be aware of. As you may already know, the IRS limits the amount you can contribute to a tax-favored retirement account like an IRA or 401(k). For 2018, those limits are $5,500 to an IRA and $18,500 to a 401(k) for most people.
But for people who are at least 50 years old, those contribution limits increase. For an IRA, workers can save an additional $1,000, for a total contribution of $6,500. For a 401(k), they can add another $6,000, bringing the total limit to $24,500.
Of course, just because you’re allowed to save more once you turn 50 doesn’t mean you actually can. If you don’t think you can come up with the extra funds you need to contribute more to your retirement savings out of your current income, you may want to consider different ways to increase your income.
For instance, you could work overtime, take on a separate part-time job, or start doing some work online. If you have items at home that you no longer want or need, consider selling them to someone who does. Or start a small business of your own—maybe buying things cheap at garage sales or antique stores and reselling them on the Internet.
A little bit of creativity in how you make money later in life can be a big boost to your retirement savings.
Yet another strategy is to push back your retirement a few years. This can help you in two ways:
- More time and money to save. By retiring later, you earn money for longer. And that’s more money you can put away in your retirement account.
- Increased Social Security benefits. If you wait to begin taking Social Security retirement benefits beyond your full retirement age, you can qualify for increased Social Security benefits—up to as much as 30% more, depending on when you were born.
The End of the Year is a Good Time to Think About Retirement Savings
As we approach the end of 2018, it’s a good time to start thinking about whether you’re putting as much as you can—and as much as you’ll need—into your retirement account. If you haven’t been, think about what strategies you could follow to increase the amount you’re saving now and in the future.
Just like it’s never too late to start estate planning, it’s never too late to start saving for retirement!