Most people when they reach age 50 can see the retirement light at the end of the tunnel. They start to think about all the things they’ll be doing when they stop working. Unfortunately, many people have not saved enough to retire when they want.
If you are behind, all hope is not lost. Here are a few things to take into consideration:
1. Reassess your goals. Around age 50 most investors are concerned about saving for college too. You may have to re prioritize your goals, and make retirement first. You may have to consider living in a less expensive location or fewer hobbies. In any case, this may help make retirement more affordable.
2. Save More. I say it all the time, save your money and one day it will return the favor. Everything in life requires tradeoff, and you may have to sacrifice something now in order to have the dream retirement you want. After age 50 you have some savings advantages. Your 401(k) has an increased limit to $23,000 and your IRA steps up to $6,000.
3. Downsize. Downsizing on small expenses such as hobbies, eating out and shopping may help some. You may have to consider more drastic measures such as moving to a smaller home or a location with a lower cost of living.
4. Keep Working. This is a trend that is increasingly becoming more popular. After the 2008 Credit Crisis, some investors were forced to continue working because of the decline in portfolio values. Working longer can allow you to put off the retirement goal and save more money.
5. Watch Portfolio Risk. Some advisors will tell you that you may need to increase your exposure to the stock market in order to get better returns to make up for your savings shortfall. If your risk toleranceis not high, you may want to consider just saving more instead. You have less time to make up for portfolio declines in bad markets.
6. Be Careful of Scams. When people are behind on retirement savings, they feel overwhelmed and are more likely to take extreme measures to catch up. The elderly are swindled out of hundreds of millions of dollars every year. Beware of get-rich-quick scams. If it’s too good to be true, it probably is.
If you find yourself behind on retirement savings, develop a financial plan so that you know exactly how much you need to be saving and what return you should try to get. Ever try to get somewhere you’ve never been without a map? If you need help with retirement savings, write me at email@example.com or call me at (859) 225-2596.