3 Steps To Catching Up On Your Retirement Savings

Who doesn’t wish they had started saving earlier for retirement? Have you met anyone who ever complained about saving too much? The simplest way to ensure you retire comfortably is to start saving early and let the power of compound interest work for you over time.

But what happens if you’re having a late start on retirement, or financial troubles in your middle age have eaten into your nest egg? No matter where you are in the retirement planning process, you may be able to do more to get prepared for a comfortable retirement.

#1. Take Advantage of Catch-up Contributions

Beginning in the year when you turn 50, you’ll be allowed to make annual “catch-up contributions” to a 401(k) plan and IRA, to increase their contribution. For example, they can make an extra contribution of $6,000 to their 401(k), equating to a maximum contribution of $24,000. IRA catch-ups are $1,000, leading to a maximum contribution of $6,500.

#2. Work longer

A powerful way to catch up is simply by working longer. When you retire too early, you’re drawing down your nest egg for expenses instead of contributing and growing that money, over time, in your investment account. But there’s another benefit to delaying your work exit: a higher social security benefit. Each year you postpone taking benefits between the age of 62 and 70, your eventual benefits will increase by 7% to 8% (possibly more), depending on your work history.

#3. Downsize your home

Housing is probably one of your biggest expenses, but other major outlays should be reassessed for any savings opportunity. If you no longer need the amount of space you once did, consider downsizing. Reduced living costs—including transportation as well as housing and maintenance expenses—could free up cash to put into savings, and you could invest any profits from the sale of your home. You might even think about relocating to a neighboring town with lower property tax rates, or to one of the seven states with no personal income tax.

You will have to be disciplined and make some solid financial choices. Working at least part-time in retirement, could also give your finances a boost. Consider these steps to catching up, and if necessary, try speaking with a Transamerica Retirement Counselor about ways you could make up for lost time.