What can you do to catch up on your retirement savings when you are on the opposite side of 40 without having saved enough for your pension? The good news is it’s never too late to begin. Sure, you may already have let the easiest and most secure path to retirement pass you by, but all is not lost.
The road to retirement saving for late starters may have more challenges, but it is still possible if you take the following steps:
Boost your savings by reducing expenses and increasing savings
The first step you should take is to increase your savings. While this may seem like a simple tactic, it may be unpopular to many because it will mean changing their lifestyle by decreasing spending. The best way to achieve this is by setting up an automatic withdrawal plan from your income so that you never see the money in the first place. You cannot miss money that you do not have access to and the inconvenience of having to spend less will be offset by the secure feeling that your retirement savings are now on track.
Convert assets that are not producing any income into investment savings.
Once you have exhausted the easiest ways to increase your retirement savings and you still have not achieved your investment retirement estimations, it is time to look for alternative strategies. For example, convert your big-ticket assets into retirement savings. This is a good place to start, and for most people their biggest ticket asset are their homes.
You can downsize your home. Consider down-scaling down to a smaller, less expensive house. This will boost your savings because you increase investment income while simultaneously reducing or eliminating certain expenses such as your mortgage/rent payments, utilities costs, maintenance, home insurance, property taxes, etc.
You can also relocate where you live to a cheaper neighborhood. For example, you may be living in a high cost area where property values have soared. In such a case, consider relocating to a lower cost housing market. The price differentials between certain housing markets can be enough to fund a significant portion of some people’s retirement needs
Redefine your retirement to retire later than you have planned
Most people might feel that the longer they will work, the fewer the years they will get for retirement. However, the big issue should be that retirement must be financed from the savings accumulated from work years. Therefore, work longer if you have not saved enough. This elongates the years to continue growing your savings while having your employer cover medical insurance and other expenses. This can dramatically close the retirement savings gap.
In addition, delayed retirement can allow you to increase the years you contribute to Social Security, which can significantly increase the level of benefits you receive. Similarly, some defined benefit pension plans increase benefits when you remain on the job longer.
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