How To Catch Up For Retirement In A Hurry
By Lisa Strohm
Do you ever lose sleep wondering if you’ll have enough money to retire? Even if you’ve saved diligently over the years, you may question whether or not you’ll be able to continue enjoying your current lifestyle when you’re no longer working. If so, you’re not alone. Transamerica Center for Retirement Studies reports that only 10% of women are confident in their ability to retire comfortably. (1)
This lack of confidence may stem from the fact that only 51% have made retirement savings their priority. You have many competing financial responsibilities, everything from covering bills to paying for daycare to helping your kids through college. It’s easy to put saving off for the future, but thankfully, regardless of how much or how little you have built up in your nest egg, it’s not too late to bulk up your savings and catch up for retirement in a hurry. Here are six steps you can take today.
1. Boost Your Savings Rate
The most obvious thing you can do is save more. Cut back on expenses, channel a healthy percentage of any raises and bonuses directly to savings, and automate savings increases of 1% of your paycheck every few months. It may not seem like you are making much of an impact, but every dollar helps.
Your increased savings can be invested in your company 401(k) or 403(b) plan or your personal IRA. If you are over 50, you (and your spouse, even if only you work) can invest an extra $1,000 per year into an IRA for a total of $6,500 for 2018. The catch-up contribution for those over 50 is even greater for 401(k) and 403(b) plans at $6,000, for a total contribution limit of $24,500. If you’ve managed to max out your IRA and workplace retirement plan and still aren’t saving enough, you can open a taxable brokerage account for your additional savings.
2. Invest For Growth
Your goal retirement date doesn’t have to dictate your investment time horizon. You may be planning to retire in 10 years, but you don’t need to set a 10-year horizon for your investments because you’ll only need a small portion of your nest egg in the early years. The rest of your money may stay invested for another 20 to 40 years. Make sure you invest with the right perspective so you can achieve as much growth as possible.
One thing to remember, though, is not to try to chase unreasonable returns as a way to make up for a lack of retirement savings. Your portfolio’s asset allocation can be positioned for growth without employing questionable, high-risk investments. High-risk investments aren’t worth the risk of losing half your money when the next market correction strikes.
3. Evaluate Your Insurance Coverage
Insurance is one of those financial products that most people purchase and then promptly forget about. It would be worthwhile to review all of your insurance policies to ensure that you actually need the coverage you have. Your needs may have changed dramatically since you had a young family and there is no point in paying for something you do not need.
Also, you should consider putting Long-Term Care insurance in place once you are over age 60. Nothing drains a nest egg faster than living in a nursing home and paying out of pocket. Someone turning 65 today has almost a 70% chance of needing some type of long-term care services, (2) and the chances are even higher for women due to their greater longevity. Because of their longer life estimations, women also pay significantly more for long-term care, so it is important to consider how long-term care will affect your overall retirement plan.
4. Get Rid Of Consumer Debt
The less debt you have when you enter retirement, the better. Reducing your consumer debt before retiring helps you lower your monthly expenses and enables your savings to grow and last longer.
Review all current debts you face and compare interest rates and balances. This can help you decide which to pay off first. Once you’ve eliminated credit card and auto debt, see how you can aggressively pay off your mortgage. Not having a mortgage could reduce your monthly expenses by up to a third and make a significant impact on how you spend your savings.
5. Downsize Your Home
Chances are that as you near retirement, your housing needs are different than they were when you were raising a family. Many people downsize their homes prior to retirement as a way to reduce or eliminate debt and reduce utility expenses. In addition to the financial benefits of downsizing, a smaller home and yard require less work and cleaning, and a one-story home could be much more practical as you age.
6. Work Longer
There are several benefits to delaying retirement to work a few more years, or to work part-time during retirement. The biggest reason is that you have more time to earn an income and save. And every additional year that you work is one less year that you will be depending on savings and draining your nest egg.
Working longer will also allow you to delay claiming Social Security. While Social Security benefits can be claimed as early as age 62, the longer you wait to file, the greater the benefit you will receive. If you file at age 62, you will only receive 75% of your earned benefit, but waiting until age 70 allows you to receive 132% of your earned benefit. This can make a substantial difference in your retirement income for the rest of your life.
If you’re considering retiring before your Social Security kicks in, you may want to think again. In that case, you would have to draw down your retirement assets for 100% of your monthly expenses. Waiting until your Social Security benefits begin allows you to let more of your retirement savings remain invested for the future.
I’m Here To Help
There is no lack of options for boosting your retirement savings, but investing, insurance, and Social Security rules can be complicated and confusing. This is why it’s important to turn to an experienced financial professional who is familiar with the pressures and obstacles women face when it comes to financial planning. At The Athena Network, we strive to empower women with financial confidence and guide you to your ideal retirement. No matter how old you are or how little you have saved, it’s never too late as long as you get started today. Email me at email@example.com or call 484.224.3439 or click here to schedule your free introductory meeting.
Lisa Strohm, CFP®, MBA is the founder and CEO of The Athena Network and Good Life Advisors of the Lehigh Valley, fee-based wealth management firms. She specializes in providing financial planning, investment management, and life management services for women and their families across the U.S. With more than 18 years of industry experience, she sets her firms apart from traditional wealth management companies by focusing on providing clients with an educational, collaborative, supportive experience that inspires her clients to engage in their financial lives. If you have a question, please click this link to schedule a phone call today. To learn more, visit https://the-athena-network.com/ or connect with Lisa on LinkedIn and Facebook.
Investment advice and financial planning offered through Good Life Advisors, LLC, a registered investment advisor. Good Life and The Athena Network are separate entities.