A 2013 survey from Fidelity Investments revealed the average baby boomer is on track to reach just 81 per cent of their retirement income needs for food, shelter and medical care. The survey asked more than 2,000 participants a range of questions on topics, including their health, retirement and saving habits, and found that just 40 percent of participants across all generations were saving less than six percent of their salaries for retirement. Financial planners consider saving 10 to 15 percent of salaries is optimum for a comfortable retirement.
Some simple arithmetic and an examination of assets, including retirement accounts and savings, can shed light on how rosy or bleak a person’s retirement looks. Young professionals have time to make up for their indiscretions, but those over 50 who haven’t saved enough for retirement must plan now to ensure their retirement years are comfortable. The following are a handful of ways to catch up on retirement savings.
Start spending less.
Men and women over 50 know that the sand in their earnings hourglass is running out, and those behind on retirement savings need to make the most of their earnings in the years ahead. Examine all monthly and annual expenses to find ways to trim some fat, such as downsizing to a less expensive and more fuel-efficient vehicle, using public transit whenever possible, cancelling country club memberships in favor of golfing on more affordable public courses, or giving up that daily latte. Slashing spending won’t be easy, but doing so is the first step toward catching up on retirement savings.
If you have not been contributing the maximum amount to a retirement plan, start doing so. This is especially beneficial if your employer matches your contributions.
Put more in traditional savings accounts.
Though it’s best to put as much money into tax-free savings accounts, if you are already maxing out your contributions it’s still good to sock away funds into a traditional account. The benefit here is the money you put into traditional savings accounts has already been taxed so you won’t incur any bills from the tax man once you begin to use that money down the road.
A growing number of baby boomers have chosen this option while they build a more substantial retirement portfolio while decreasing the amount of time they’ll be relying on savings and investment income.
An investment advisor can help prepare a plan and explain the many ways those over 50 can get their retirement goals on track.