Did you get a late start on retirement planning? Are you worried that you won't have enough money to retire comfortably? You're not alone. Many workers who are approaching retirement share your same concerns. The good news is that it's never too late to start saving. With some focused effort and a few adjustments to your retirement plans, you may even be able to save enough to fund a happy and fulfilling retirement. Here are three tips to help you catch up on your retirement savings:
Use catch-up savings rules. The IRS sets limits on how much money you can contribute every year to qualified retirement accounts like 401k plans or IRAs. However, if you are over the age of 50, the IRS allows you to make extra contributions in an effort to catch up. For example, in 2016, the IRS allows you to contribute an additional $6,000 per year above and beyond the normal contribution limit to employer-sponsored retirement plans like 401k plans, 403b plans, and government 457b plans. You can also contribute an extra $1,000 per year to IRAs. If you start making catch-up contributions at age 50 and continue to make them over a 10 or 15-year period, you could have a substantial amount saved by the time you retire.
Alter your plans. It's possible that even by maximizing your savings amounts, you still could end up with less than you need for retirement. Another solution may be to slightly alter your retirement plans. Perhaps you could delay retirement by a few years so you can save additional money. You could also decide to work part-time in retirement so you'll have supplemental income. Another possible change is to downsize and move into a smaller home so you have a reduced mortgage, lower utility bills, and lower maintenance costs.
Reallocate your investments. The allocation of your investments can play a big role in your retirement savings. If you are allocated too aggressively, you could expose yourself to unnecessary risk and potentially lose a substantial amount of money. However, that doesn't mean you should avoid risk altogether. There are also investments that are too conservative. They may not have much risk or volatility, but they may not offer enough return potential either. You will likely need some growth in your retirement assets to fund withdrawals and combat inflation. By going too conservative, you may not get the growth that you need.
A financial consultant can evaluate your retirement and savings plans and help you make the changes you need to get back on track. Schedule an appointment with a financial planner today to develop your plan.