Ten Tips on Saving for Retirement When You Start Late
If you've put off saving for retirement, you still have options to catch up and become more financially secure.
It's good to start saving for your retirement early in your career, but many people put it off for one reason or another. If this includes you, don't fret. You still have options that can help you catch up and become more financially secure.
1. Figure out your retirement goal
You need to have a general idea of how much you’ll need to fund your retirement. Try out some online calculators to help you come up with the right target. Nevada State Bank has several that can help you out. This one will help you determine what size your retirement nest egg should be. This one can help you compare how a Roth 401(K) and a Traditional 401(K) will impact your paycheck. There are several others related to Roth and Traditional options here.
2. Pay off what debt you can
You’ll have a lot more success in retirement if you don't have a lot of debt piled up, so start paying off any debt you can as soon as you can. Even if it's not feasible to eliminate your debt immediately, you might be able to consolidate high-interest debt and get a lower interest rate to pay. Talk to your banker about getting a better credit card, a personal line of credit, or a home equity line. Any of these options may save you money that would be better used as part of your retirement fund.
3. Keep an eye on your credit score
Regularly check your credit score to be sure that it's in good shape. You probably know certain benefits of having good credit, such as being able to get approval on loan applications, but good credit can help you in retirement in other ways. CreditCards.com1 gives five reasons you need good credit in retirement, and these include: reduced travel costs via credit card rewards, lower insurance rates, family care by way of a needed loan, moving or downsizing options, and being able to obtain credit to cover emergency costs.
4. Come up with a new, tighter budget
The reality is that if you've waited a long time to start saving for retirement, you have some serious catching up to do. This very well may mean that you need to tighten your budget. Take a look at all your monthly and weekly expenses. Figure out which expenses can be eliminated or reduced and how much you have left over that you can add to your retirement account.2 Then, stick to your budget. If you do, your savings can add up quickly.
5. Set up an emergency fund, and don't touch it unless absolutely necessary
It's a good idea to keep an emergency fund, whether or not you're planning for retirement. Create a savings account and add to it on a regular basis. Only make withdrawals when it's absolutely necessary. If no financial emergencies come up, and you keep adding to it over the years, this fund can be turned into a significant part of your retirement savings when the time comes.
6. Consider downsizing your home
How big is your home? More importantly, how expensive is it? While it may not be realistic for those with large families, downsizing to a smaller place could save you some money on an ongoing basis. In fact, many people like to downsize as they get older to save themselves from having to take care of a large house or navigate stairways. Downsizing earlier in your life can help you be prepared for retirement age in more ways than one.
7. Consider moving to a less expensive location
Downsizing is one thing, but even moving to a less expensive location can help you save for retirement. Depending on where you live and the real estate market, you may be able to keep the same size home by living in an area with a less expensive cost of living.
8. Don't opt for the lowest-risk investments if you still have a significant amount of time left in the workforce
If you've started saving for retirement on the late side, you may think it's best to stay conservative with the investments in your retirement plan. This may not be the best approach, however. As Deborah Fowles at The Balance notes, "Even at 45 or 50 years old, you have several decades for your retirement earnings to grow, so invest a large percentage in carefully researched, proven stocks, or better yet, mutual funds."3
9. Find a secondary source of income
If you've waited too long to start saving, you may need additional income, such as getting a second job, even if it's only temporary. If you can sustain a living with your current job, you can put 100 percent of the income from your second source directly into your retirement, which can be a great way to save a sizeable amount quickly.
10. Wait longer to retire
One last option is simply to wait longer before retiring. The longer you work, the more you can save up. This may not be the most attractive option, but if it means that you're better prepared, it could be a wise one.
The main takeaway here is that it's okay if you've put off saving for retirement, but the sooner you start, the better. There are still options if you're smart about how you manage your money.
2. This Two Cents article details some of the ways you can painlessly reduce your monthly expenses.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC