If you feel behind on your retirement savings, you are not alone. In fact, 62% of Americans say that they need to catch up on saving for retirement. Some cite the reason for falling behind as inadequate income, while others claim it to be because of high housing costs or other expenses.* Regardless, it can be easy to fall behind on retirement savings… or perhaps never even start.
But know this: even someone in their 40s or 50s still has the capability to save a substantial amount of money for retirement. It’s not too late! With a little bit of careful planning alongside one of Salt Lake City’s best retirement financial advisors and some extra savings, you can still have the retirement that you are hoping for. The key is to start now and implement these four steps.
1 — Reexamine Your Spending
Downsizing your lifestyle isn’t necessarily fun; in fact, it can be downright painful! However, if you want to expedite your savings, you have to find the money to do it. The simplest way to do this is by taking a look at your monthly budget and trimming back on the things that mean the least to you. Nobody wants to cut out the things they really enjoy, so look specifically for discretionary expenses that you would miss the least if those things were gone. This may be a gym membership that you don’t use, a fancier car than you really care to have, or even your morning Starbucks run.
Another way you can squeeze extra money out of your monthly budget includes looking for a better deal on things like car insurance or phone service. Make sure that as you save money in one area of your life, those dollars make it into your retirement savings on the other side. This effort is wasted if they just get spent somewhere else. Every dollar you save and invest will compound in your retirement account to help you reach your goals.
2 — Max Out Your 401(K) Contributions
Many people contribute as much as they need to get their employer match within their 401(k). This is great, but it’s only a start. For most eligible employees, their 401(k) can be their most powerful retirement savings tool due to its tax advantages. The maximum employee contribution is $19,500 for 2020, and this doesn’t include employer contributions. If you are behind on your retirement savings, increasing your 401(k) contributions is likely the best place to start.
3 — Take Advantage of Catch-Up Contributions
If you are over age 50, you are eligible for “catch-up contributions” to your 401(k) or IRA. You can contribute an additional $6,500 to a 401(k) yearly, and an extra $1,000 to an IRA yearly. So, once you have maxed out the regular yearly contributions to your retirement account, take advantage of your ability to contribute a little extra.
4 — Ease Into Retirement
Of course, no one wants to hear us say, “push back retirement.” This may not even be possible for everyone. But, if you are behind on your retirement savings, delaying retirement withdrawals is perhaps the most powerful tool at your disposal as it allows compound interest to work its magic on your retirement savings.
Usually, the best option is “easing” into retirement, meaning that you continue to work part-time, using that income to allow you to not withdraw from your retirement savings until you have to. Additional contributions during this time are a nice bonus, but not always essential. The longer you can leave your retirement savings untouched, the more compound interest will help it grow.
Additionally, this strategy can have significant emotional benefits as well. Many people find they enjoy their work substantially more at a slower pace and with more flexibility.
So, know that even if you are feeling behind when it comes to retirement savings, there is still hope. Our TrueNorth Wealth fee-based financial planners in Salt Lake City specialize in creating a retirement plan that is specific to your unique circumstance, and we are committed to helping you reach your retirement goals. With careful planning, saving, and investing, we will assist you in every stage of life leading up to and during retirement.