6 ways to catch up on retirement saving


If your retirement stash isn’t quite as sizeable as you’d like, you’re not alone. A 2014 survey by Bankrate.com found more than one-third of Americans, including more than a quarter of those age 50 to 64, don’t have anything saved for retirement. While many plan to address this situation by simply delaying or foregoing retirement and staying on the job, the reality is that may not always be possible. Here are some ways to start making up a retirement shortfall.

1. Focus on paying off high-interest debt. Credit card balances, car loans, and personal loans are often high interest money drains. By carrying debts and sending a check to the bank each month, you’re foregoing money you could be saving for the future. When you pay off a debt, you’re effectively saving 8%, 10%, 12% or more that the debt was costing you, and you’re also eliminating a major expense in retirement.

2. Make the most of your retirement accounts. A study by the Schwartz Center for Economic Policy Analysis at The New School found 68% of Americans age 25-64 weren’t participating in an employer-sponsored retirement plan like a 401(k). By missing out on the employer match, you’re leaving money on the table. Retirement accounts like 401(k)s and IRAs offer tax benefits as well, so they’re a good place to put as much of your retirement savings as you can. If you’re age 50 or over, you’re allowed higher annual contribution limits than younger workers.

3. Look for ways to reduce expenses. After you get rid of any high interest debt, you can look for other ways to cut costs. For example, you might downsize your living quarters. If your kids are out on their own and you no longer need such a large home, moving to a smaller home or less expensive area may be a way to cut down property taxes, insurance, and mortgage or rent payments.

After housing, there may be other areas in which to save. You could shop for discounts or savings on car and homeowners insurance, cell phone, and cable plans. You could take advantage of senior discounts on these as well as food, apparel, and entertainment. Small savings add up. If you save just $10 per month in each of 10 different areas, that’s $100 per month in savings, or $1,200 per year. Looking for ways to save a little less in multiple areas is a better plan than, for example, eliminating your cell phone, cable, or dining out altogether.

4. Work more. Besides cutting expenses, another way to come up with more retirement savings is to boost your income. You could consider working extra hours, taking on a second job, or starting a side business. You could also consider working parttime in retirement. A 2014 survey from Merrill Lynch found that 72% of those age 50 and older plan to work during their retirement years either for the fulfillment of having a job, or simply for the paycheck.

5. Invest. Saving for retirement is half of the equation. The other half is what you do with the sabings. If you’re behind on retirement savings, and have a decade or more till your planned retirement age, you can’t rely on low-growth CDs and savings accounts to get you where you want to go. You’ll need to put some of it in stocks.

If you save $12,000 per year for 15 years, you’ll have $180,000 saved. But if you invest your savings in stocks with an average 7% return, you’ll have $300,000. Yes, there’s risk associated with investing in stocks. But leaving your investments in low-interest accounts is also risky, because inflation will erode their value and increase your risk of not having enough to retire. See Warren Buffett’s 15-minute retirement plan.

6. Adjust your lifestyle. If you’ve worked on all of these suggestions and still find yourself short of retirement funds, a realistic option you’re left with is to temper your expectations in retirement, by scaling back your plans for hobbies, travel, or nonessential expenses. You might also seek the guidance of a financial consultant, or assistance from government and private agencies.



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