How to make up a shortfall in retirement savings


If you find yourself a little short on retirement savings, you’re certainly not alone. A 2014 survey by found more than a third of Americans, including more than a quarter of those age 50 to 64, have no retirement savings at all. What do you do if retirement is looming and your coffers aren’t as full as you’d like?

The two main things are to: lower your expenses, and increase your savings. Here are some ways to do that.

Don’t forget stocks. Most financial advisors encourage saving early, in order to put the power of compounding to work for you. But even if you’re late getting started, you shouldn’t neglect stocks. Investing in the stock market comes with risk, but also long-term rewards. Your retirement may last 20 years or more. A sound investment plan with a properly diversified portfolio is the best way to grow your nest egg.

Take full advantage of retirement accounts. You can max out contributions to your employer-sponsored 401(k) at $18,000 if you’re under 50, or $24,000 if you’re 50 or over. You can also open an IRA at any time and contribute up to $5,500 per year, or $6,500 if you’re 50 or over.

Lower or eliminate your debt. Carry as little debt into retirement as possible. Mortgage payments, car payments, and credit card bills will eat into your retirement savings, leaving you less to live on. While you’re working, devote part of your paychecks to retiring any debt you have. Student loans are particularly troublesome, as they don’t expire and there are limited ways to forgive them. A growing number of older Americans are carrying educational loan balances – $18.2 billion in 2013, according to the Government Accountability Office.

Many seniors have debt from education loans they took out years ago. Many parents take on education debt for their children. In another post we suggest why you shouldn’t imperil your retirement on behalf of your children’s education. If you have a student loan, aim to pay it off as soon as possible. The Department of Education’s online calculator can help you devise a repayment plan. If the payments are too high, you may be able to negotiate with the loan holder to extend the term of the loan (which also increases the interest). This page suggests other ways to deal with a student debt.

Look at ways to trim expenses. You may be eligible for senior discounts or relief on your property tax, cell phone plan, and other costs. Your auto insurance rate may go down after you’re no longer commuting to work. If your time is more flexible now, you can take advantage of off-peak discounts at airlines, hotels, and restaurants. If your kids are out of the home, and you no longer need to live close to work, you might be able to move to a smaller home, a less expensive neighborhood, or even a lower cost state. A smaller home means lower property taxes and utility bills. If you rent, moving to a smaller apartment can save 20% or more in many areas.

Consider working more. A part-time job just a few hours per week in your spare time can add up to significant additional savings. After retirement, a part-time position can make up for a shortfall in your income. A Merrill Lynch survey in 2014 found that 70% of those age 50 or over plan to work some during their retirement years, either for the money or to remain productive.


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