Many Americans have been driven by the pandemic to look more closely at their financial accounts, and for quite a few of them, a sobering realization has emerged: They haven’t been saving enough money for their post-work years.
19% of Americans regret not investing for retirement sooner, according to Bankrate’s most recent Financial Security poll.
Your age and your goals for leaving the employment will determine your plan, as well as how quickly you need to make significant changes, if you’re attempting to figure out how to catch up on retirement funds.
Your twenties: Make a plan.
You’ll have a lot of life’s first startup costs when you’re in your 20s. You might be intent on settling down, getting hitched, or paying off your student loan debt. Even with all of these competing demands on your money, now is the perfect time to make the most crucial move toward regularizing your retirement savings.
Enroll in your employment retirement plan, and make sure to use any employer matching opportunities by saving a minimum of 10% of your income for retirement. You are essentially rejecting free money if you don’t invest enough to get the maximum business match.
Open an IRA (you can select a traditional or a Roth IRA) and make regular monthly contributions via automatic investing from your checking account if you don’t have access to a typical 401(k). Even if retirement might seem like a different world right now, you’ll look back and be grateful that you were younger. The growth potential of regular contributions can be shown by Bankrate’s Roth IRA Calculator to give you a sense of how well you can position yourself over the long term.
You should accelerate your savings in your 30s.
So you didn’t begin saving till you were in your 20s? It’s not just you. According to data from Nationwide, the average American begins saving for retirement at the age of 31.
If you were to start today, the 10% figure would be more appropriately closer to 15% of your salary. You should make an effort to continue raising your retirement contributions as your income rises. In addition, you have probably already covered some of the beginning costs of your 20s, so you should be in a better position to increase your savings.
Your forties: It’s time to get assertive
This is the moment to buckle down and concentrate on how to make up lost retirement funds if you’re just getting started. Open an IRA and think about transferring any 401(k) plans from prior companies. Additionally, you should carefully examine your spending to determine where you can cut back.
If you’re still behind on your retirement savings, you should strive to allocate even more of your income to your long-term cushion at this time than the recommended 15 percent. To get a clear idea of how much you need to save in order to reduce the stress of living on a fixed income, use Bankrate’s Retirement Savings Calculator.
You should be somewhat aggressive when investing your savings in addition to being aggressive with how much you save. You should lean toward riskier assets, like the stock market, with 20 to 30 years left in the workforce in order to compound at higher rates of return over a longer period of time.
Play catch-up with your contributions in your fifties.
Although reaching the halfway point may seem overwhelming, there is some good news: the chance to benefit from larger tax-advantaged donations.
Currently, it translates to an additional $1,000 each year for regular and Roth IRA plans, beginning the year you turn 50. You can save an additional $6,500 for a 401(k), 403(b), or 457 plan and benefit from a reduced tax obligation. You should routinely assess any opportunities to reduce expenditure in order to increase your retirement savings, just as you did in your 40s.
Your 60s: Consider the future and make necessary adjustments.
Your 60s are a time when you should reevaluate your goals for retirement spending rather than trying to catch up on retirement funds. It’s important to start considering the lifestyle you desire and the costs of living you’ll incur once you quit working if you’re falling behind on your savings.
Plan to postpone receiving Social Security payments until you are 70. Delaying advantages will result in a larger benefit down the road. It can be a good idea to think about working more hours or cutting back on your post-work activities, depending on your circumstances.
Keep in mind that you have limited control over your retirement.
I frequently hear people in their 50s and 60s bemoan the fact that they are seriously behind on their savings. They assume there is no hope and just claim they’ll work forever rather than considering how to get ahead for retirement.
That, though, is unfeasible, and ultimately, it might not be up to you. Even if you adore your job, health issues could make it impossible for you to keep working in the same capacity. Your retirement may also be decided upon by your company.
In light of this, it’s crucial to understand that it’s never too late to begin saving for retirement (and that it’s also never too early, either). No matter how far behind you may believe you are, now is always a good time to plan how you will change your spending habits and set aside more funds to make the most of your senior years.