Your retirement is known as “the golden years” for a reason.
Traveling, relaxing, spending more time with family and friends…knowing that one day you’ll be able to choose whatever it is that you want to do is what keeps most of us working so hard day in and day out.
But what happens if you haven’t prepared for this important milestone and all the years that follow?
It’s never too late to put a strategic plan in place to prepare for a retirement you will enjoy.
Here are 4 ways you can catch up on saving for retirement:
1 - Know Your Expenses
We discuss this ALL THE TIME on our radio show, blog, and videos.
When preparing for retirement, you want to start by knowing your expenses. Without evaluating your living expenses, you may overestimate or underestimate how much you will truly need in retirement.
Not all retirement expenses are created equally. As you prepare for retirement, it is important to understand there are generally two kinds of retirement expenses:
ESSENTIAL: These are expenses you have to pay, such as your mortgage and other related home expenses, food, car bills/maintenance, healthcare, etc.
DISCRETIONARY: There are your "lifestyle" expenses, such as entertainment, travel, and other leisure activities.
A secure retirement is built on the foundation of having enough guaranteed income to meet your ESSENTIAL expenses. Of course, we all want to be able to LIVE THE LIFESTYLE of our choice, but we know at the very least that if we meet our essential expenses, we'll be able to sleep well at night.
This also allows you to see where you can cut back on your spending. Since you want to max out your retirement contributions and pay off debt (we'll get to the reason why in a minute), cutting back on unnecessary expenses will help you tremendously.
2 - Play Catch-Up
If you are preparing for retirement but haven't been paying attention to whether or not you have saved enough, it should be no surprise that you might have to find a way to play catch-up on your retirement savings.
If you do need to catch up, one of the first things you should look at is your current retirement account contributions.
If your company matches, make sure to max out your 401(k) account contributions every year leading up to your retirement. If you have the option, you may also want to consider maxing out your Roth IRA contributions, which will grow tax-free. (You also withdraw from a Roth IRA tax-free, so it’s a great way to supplement your income in retirement!)
You should also consider saving money in other places aside from a retirement account if you have already maxed out those options. We're a big proponent of the "3 bucket approach" to retirement planning - having a liquidity bucket (cash to be able to access quickly), a bucket where you have a steady stream of income to cover your essential expenses (take a look at our After The Paycheck episode on choosing your distribution method in retirement), and a bucket focused on growth so you can keep up with rising costs (inflation, taxes, etc.).
For our clients, our 365 Retirement Plan process analyzes their unique situation and makes recommendations to make sure they are balanced in these three areas to help increase their probability of success in retirement. Upon implementation, every part of the 365 Retirement Plan is custom tailored and built to work every day of the year, so they won't have to.
3 - Delay Your Retirement
Use time to your advantage when saving for retirement. Every year that you delay your retirement and continue to make contributions to your retirement accounts, you are improving your retirement status.
Another option is to work part-time during your retirement, which lets you supplement your retirement income, so you aren’t solely relying on what you have saved.
Of course, if you are hoping to retire within the next five to ten years, neither of these are ideal; which is why it is very important to take action now and calculate your expenses to see if you actually WILL have income gap in retirement.
4 - Pay Off Your Debt
While saving for retirement, be sure you’re also paying off debt. Keep in mind that your current income may be more than your retirement income will be, so you want as much space in your budget as possible.
It’s Not Too Late to Prepare for Retirement
To experience an enjoyable retirement, you must prepare financially—at any age. In addition to completing the steps outlined above, to begin your retirement years in the best financial state possible, it is essential to speak with a financial advisor skilled in retirement planning.
Just as no two people are alike, we believe no two retirement plans should be, either. Our 365 Retirement Plan Process is designed to create a personal relationship with you, taking the time to truly understand your unique personal and financial situation.
Call (617) 630-8787 or reserve time through our calendar to request your complimentary 365 Retirement Plan consultation. We'll take the time to create a customized strategy to help you pursue your retirement goals.