If you’re a Baby Boomer in your late 40s, or early 50s and you know your retirement savings are not on track, don’t despair. And don’t abandon your savings goals. You’ll still be able to put away a significant amount of money, but you’ll have to get serious about the process.
Start by calculating how much you need to have when you retire and how much you have saved. Don’t succumb to the temptation to avoid this task because you're afraid to find out you're not in the ballpark. You’ll be surprised how motivating it can be to learn the answer.
Calculating your retirement needs can be tricky. You may want to hire a financial planner or advisor. Before you do, click here to get some tips on hiring the right person:
Generally, your peak earning power is in the last few years before retirement. It’s also typical during those years to increase your lifestyle as the income increases. But if you’re going to meet your retirement goals, put those raises into savings instead. If you’re worried about seeing a big dip in your lifestyle after retirement, consider reducing your standard of living now a little bit so you can even out the income later. Not only will you be able to save more for later but voluntarily cutting back now will be much easier than a severe, forced cutback later.
If you foresee that more income will be needed to pad your nest for later, you may want to take on a second job now, or have a non-working spouse find a job with the strategy of putting all of his or her wages into your retirement account. Or, start a side business for additional income.
Be sure you are contributing the maximum to tax-advantaged retirement plans, especially if your employer matches your 401 (k) contributions. If your employer is willing to match more than you are putting in, you are essentially throwing away free money. And as we know there is very little free anything in this world.
Check out traditional and ROTH individual retirement accounts. For a better understanding of ROTH IRAs click the link below. If you expect your tax bracket to be higher when you retire than it is now, you may want to consider putting your retirement funds into ROTH IRAs.
ROTH IRA Think About Downsizing Now that your nest is empty, you may want to consider buying a smaller house. Not only will it reduce your insurance and utility costs and possibly your property taxes, but if you have significant equity in your house, you may have some left over to put into savings. The current tax law lets a married couple exclude $500,000 of gain before tax is owed, and a single taxpayer can exclude $250,000 (provided that you’ve owned and lived in your home in at least two of the last five years).
Carefully consider your targeted retirement date. If you’ve always planned to retire at 62 but don’t think you’ll have the savings to back up that plan, you may need to push retirement back to 64 or 65 or later. You’ll have a longer period to sock away savings. Or, you may decide to go ahead and retire as planned, but work part-time in order to stretch out your retirement funds.
Whatever you decide, don’t lose sight of your goals. It’s no secret that Social Security is not so secure after all. And even if it was, it’s only a foundation, not enough to live on comfortably.
You've had one “prime of life”. Now, as an active Boomer, you’re ready for your “Second Prime!” Be part of our testing phase and share your ideas with us. Click here to take our Survey.
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