Retirement Circa 2017 (Part 3: Catch-Up Retirement Savings Strategies)
Part of my work includes working on a team that provides personal finance professional development opportunities for financial educators and counselors, especially those employed by military installations around the world. On June 6-8, 2017, the team provided a three-day series of webinars about retirement planning. The webinars are available for free viewing at any time, along with downloadable copies of the webinar slides.
I taught the third webinar about strategies that late savers can use to catch up when they are behind on retirement savings. According to the 2017 Retirement Confidence Survey, only 61% of U.S. workers have saved money for retirement and 47% of those with savings have less than $25,000 saved including 24% with less than $1,000.
The key message from the webinar was that “all hope is not lost.” Time is still on the side of late savers in their 40s and 50s who may live another 40 to 50 years to earn compound interest. There are two general categories of catch-up strategies:
Spend less/save more NOW to increase savings (e.g., do freelance work for additional income)
2. Spend less LATER to reduce the amount of savings needed (e.g., trade down to a smaller home)
The two categories of retirement catch-up strategies can also be combined. An especially effective strategy is retiring just a few years later than planned. By delaying retirement, people can continue to save in tax-deferred accounts, earn higher Social Security and/or pension benefits, and delay withdrawals from their savings.