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When you’re younger, retirement can feel like something that is a lifetime away. But as you get older, you might often find that life can get in the way of the plans you make for building the savings you need for retirement. And when that happens, that future that seemed a lifetime away can feel a little too close for comfort.
In fact, a study conducted by the Indexed Annuity Leadership Council (IALC) looked at people’s readiness for retirement and found that 40% of Americans worry about having enough saved for their retirement in years approaching retirement age. And, perhaps as a result, nearly 14% of pre-retirees take on multiple jobs to support their retirement savings goals.
For those who have found that life has interfered with their retirement savings goals, what can be done to catch up and keep on track to retire when and how they want? Here are some ideas that can help:
One thing that can keep you from saving for retirement is lingering debt. Debt is nothing new and it affects all generations. But with recent events, such as the Great Recession, older Americans are seeing their debt loads trending upward.
There’s no question that focusing on removing debt, including paying off mortgages, is a way to prepare for retirement. Without a mortgage to pay for, you could focus on saving. Paying off your home will likely take time, but in the long run, it’s worth it.
Finding Opportunities to Save
While managing debt is important, also finding opportunities to save will make the journey of catching up toward retirement a more fruitful one. There are various ways to build your retirement savings, including:
- Utilizing retirement calculators. Online retirement calculators can help determine the income needed to sustain a comfortable lifestyle in retirement.
- Setting a reachable savings goal. This goal can be based on what is currently saved in retirement accounts and what will be needed in the future.
- Downsizing your home. This may cut costs like property taxes and mortgage costs and free up room in your budget for saving more.
- Getting serious with “extra” money such as raises, inheritance, bonuses or tax refunds. Resist the urge to splurge and, instead, allocate that extra cash to your retirement, preferably into an account with tax advantages.
- Setting up recurring automatic savings through an employer. If available, employers can have part of your paycheck automatically deposited into a savings or 401k account.
Save the Extras
The IRS limits the amount individuals and their employers can contribute to tax qualified retirement plans each year. The exact contribution limits vary depending on the type of retirement plan. In addition, the IRS allows individuals over a certain age to make additional “catch-up” contributions to many plans.
Catch-up contributions may help build a solid nest egg and can present an opportunity for economic growth. For more information about catch-up contributions visit the IRS’s website.
As the Baby Boomer generation moves into retirement, making the transition away from work may not be the same for everyone. A recent study by the U.S. Bureau of Labor Statistics found that many pre-retirees favored retiring more gradually, with 25% choosing to take a part-time job before retirement and a little over 10% not planning to retire at all. Additionally, 8% chose self-employment before retirement.
For others, current concerns over the economy or even safety due to the COVID-19 pandemic are giving those who have reached retirement age pause when considering whether the timing is right to stop working.
When considering when might be the right time to start retirement, make sure to research retirement benefits like Social Security and how they may help sustain a retirement lifestyle. Workers can start collecting early retirement Social Security benefits at 62, but the benefit amount will be less than if you wait until your full retirement age to receive benefits. The closer to age 70 you wait to before taking Social Security benefits, the higher your monthly benefit amount will be. For more information about how Social Security benefits are calculated visit the SSA retirement benefits planner.
Retirement income sources like 401(k)s, social security and fixed index annuities can provide long-term benefits, such as reliable income.
Whether far down the road or right around the corner, making the plans now to prepare for retirement properly may increase the chances of entering your retirement years how you want with the income you need.
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