Retirement Catch-Up Strategies-Part 1
It is not uncommon for people to get a late start on their retirement savings. When they get older, or do an online calculation such as the Ballpark Estimate, they realize that they have a lot of catching up to do.
What to do? There are basically two courses of action: save more before retirement and/or spend less after retirement. Below, in Part 1 of this two-part blog series are six ways to save more before retirement:
¨ Increase Retirement Savings– Raise the percentage of your pay that is put into a tax-deferred retirement saving plan such as a 401(k). Even a 1% boost can make a big difference over time.
¨ Spend Less and Pay Off Debt– Reduce expenses, especially “discretionary” items such as food, clothing, and entertainment, and redirect this money to savings.
¨ “Moonlight” for Additional Income– Look for ways to earn extra income through “side hustles” and save all or part of this income for retirement.
¨ Invest More Aggressively– Increase the percentage of your investments in stock or stock mutual funds. You will take on more risk but will also have the potential for a higher long-term return vs. cash assets and bonds.
¨ Preserve Lump Sum Distributions– Reinvest lump sum distributions when you leave a job into a rollover IRA or a new employer’s retirement savings plan to keep this money tax-deferred until retirement.
¨ Work Longer Before Retiring– Decide to remain on the job longer than planned. Even 1-2 years can make a big difference by providing more years to save and accrue benefits and fewer years to withdraw savings.