The sooner you start saving for retirement, the better. Experts say you should start saving for retirement from your very first paycheck.
But what if you’ve left your 40th, or even 50th, birthday in the dust and still haven’t saved a penny for your golden years? Don’t panic — it’s not too late to start saving for your retirement, even if you’ve only got 20, 10 or fewer years left before you’re old enough to start collecting Social Security checks.
If you can eliminate unnecessary expenses and debts, you’re halfway there already. To make your retirement dreams come true, you need to save diligently, take advantage of employer contributions, look for additional sources of income and convert assets into cash that can go into your retirement accounts. Give yourself more time to grow your wealth – consider delaying retirement, and supplement your retirement savings with a part-time job.
Make a Solid Financial Plan
First things first — you don’t want to go into retirement with debt. You definitely don’t want to go into retirement with credit card debt, debt from your kids’ college educations, car loans or even a mortgage payment if you can help it. Debt payments can really eat into your monthly income, and make it that much harder to get by on whatever you’ve been able to save. If you’re if your forties or older, with no retirement savings, and with non-mortgage debt of any kind, you’re going to want to make paying off that debt a priority – but you’ll also want to go ahead and start saving for your retirement at the same time.
You should also work on cutting out unnecessary expenses now. The less money you’re used to having, the less you’ll need to feel like you’re living comfortably in retirement. Not to mention, when you reduce your expenses to the minimum and live on a budget, you’ll have that much more money to save for your old age. Since you haven’t started saving at all yet, it’s important that you make saving large amounts of money a priority from now on.
Take a long, hard look at your budget and cut out the fat. Do you really need to pay $100 a month for all those cable channels you never watch? Could you eat out once or twice a month instead of once a week? Living on a budget doesn’t have to mean never having nice things and never doing anything fun. It just means keeping your priorities in mind. If it isn’t important to you, you don’t need to pay for it.
Save Like Your Life Depends on It
The more money you’re able to put away each month, the more you’ll have to draw from when you reach retirement. If you still have 20 years until retirement, and you can afford to save $1,000 a month, you’re in pretty good shape. Assuming a six percent rate of return on your investments, you’ll be able to save about $460,000 over the course of 20 years.
Of course, if you’re already in your 50s, you’d have to be able to sock away $2,800 a month for at least 10 years to get that same amount. Few people are going to be able to save that much money. Save whatever you can. Even if you can only save $300 a month, at a six percent rate of return, you’ll still have $50,000 after 10 years. With those savings, you’ll be able to afford to grow your wealth in other ways, too. That’s money you’ll be grateful for later on.
Take Advantage of Employer Contributions and Tax Breaks
If your employer is willing to match your contributions to a 401(k) or other retirement fund, you should definitely take advantage — it’s like getting a raise, and it also reduces your overall tax bill since your own contributions are deductible. You’re allowed to put $17,000 a year into your 401(k), and if you’re over 50, you’re allowed to make catch-up contributions of $5,500 a year.
If you’re having trouble maxing out your retirement accounts out of your income, consider liquidating some of your assets. Maybe you can downsize into a smaller home or sell a boat. If so, that’s extra money you can plunk into your retirement savings. You might also consider moonlighting for extra cash — working part-time at night and on the weekends could earn you extra retirement money.
The longer you put off retirement, the more time you’ll have to save and your money will have more time to grow. You can continue to enjoy your job benefits, such as your health insurance, for a few more years. You’ll also get a bigger Social Security check if you can put off collecting it for a few years.
You might even consider working part-time in retirement – it will supplement your income and get you out of the house. Many people find that a work-at-home job or home business becomes a lucrative, enjoyable hobby in their twilight years.
It’s not impossible to have a financially comfortable retirement, even if you came late to the savings game. The key is not to put off saving for retirement any longer than you already have — start saving now, and you can still amass a hearty nest egg to see you through your old age.
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