5 Retirement Catch-up Tips
Are you approaching 40 with no retirement savings? Are you getting ready to retire and hoping to sock away a little more money? Regardless of your situation, if you’re starting to think “I may not be able to afford my weekly golf game when I quit working,” these tips can help you catch-up on retirement.
Before you start catching up, it’s important to know where you stand. Use a calculator to figure out if your current retirement savings are enough and how much income your current 401(k) savings will provide. Then, compare that to your monthly living expenses.
Amp up your retirement accounts
If you already have retirement accounts set up, take a look at your budget and see if you can save more each month. Your specific plan may depend on the type of investment account you have:
If you have a 401(k)
If you have a 401(k), start tucking away extra savings each month. Talk to your Human Resources representative or plan administrator to let them know you’d like to increase the amount you save each month. If your employer offers a 401(k) match, take it! It’s basically free money.
If you have an IRA
Look at your current budget and see where you can save. Put that extra money into your retirement funds. A little each time can really add up!
You can make contributions to your IRA at any time. This can be done online or in the form of cash or check through your plan’s sponsor (for example: the bank you opened your IRA through).
Catch-up on your contributions
Workers who are 50 or older can take advantage of “catch-up contributions,” as allowed by the IRS. This means you can make contributions to your retirement accounts that are above the standards limits for everyone else.
- For traditional 401(k)s, the catch-up contribution limit for 2018 is an additional $6,000, totaling $24,500. For those under 50, the maximum contribution to a 401(k) in 2018 is $18,500.
- For IRAs, the catch-up contribution limit is an additional $1,000, totaling $6,500. For those under 50, the maximum contribution to IRA’s is $5,500.
If you don’t have a retirement account set up, consider opening one. You can open a 401(k) through an employer, but if that’s not an option, you can also open an individual retirement account (IRA). To open an IRA, start by educating yourself on the different types. Then, you can check with your bank to see if they partner with a company that offers what you’re looking for. If they don’t, check out a list of IRA providers to find a company that does.
Cut down on your costs
The top three expenses for Americans are housing, transportation and food. But could you be spending less on these and other expenses?
If you’ve created a budget, look to see what areas you are spending too much on and where you can cut down on costs.
If you don’t have a household budget, it’s a good idea to create one. Creating a budget is one of the best ways to get a feel for your monthly expenses. If you want to keep the same quality of life in retirement, knowing how much you live on each month is one of the best ways to plan.
Any money that you can trim from your expenses can be put toward catching up on your retirement savings.
Consider downsizing your home
Downsizing your home may not be something you have ever considered, but it can positively impact your retirement plan.
- With a smaller home usually comes smaller bills for utilities, property taxes and upkeep, so downsizing could help you save on living expenses. You could then add those savings to your retirement accounts.
- If you have a mortgage, you could use the money from selling your house and downsizing toward paying off the remaining balance. Remember that there are costs when selling a home, like closing costs and other fees, so it may not be a money saving option for you.
Selling a home is a tough decision so be sure to think things through. Are you comfortable leaving the house your children grew up in? More importantly, can you and your spouse get along in a smaller bathroom?
Get a side gig
Earning income on the side can boost the extra savings you have each month that can go toward your retirement. It’s a great chance to try something you are interested in that you couldn’t make a career of or to get paid for something you may have always considered a hobby.
3 Potential Side Gigs to Consider
- Drive for a ridesharing company, like Lyft or Uber
- If you have a 4-door car, a few spare hours and can pass a driving record check, you could drive to earn some extra cash. Visit the website of the ride share company you are considering to get more information or to sign up.
- Pet sit
- Do you love animals? Do you like to be active? There are multiple apps, like Rover or Wag, which put you in contact with people who need someone to watch or walk their pets. Simply search for one of the apps in your tablet or phone’s app store and sign up.
- Open an Etsy shop
- Have you ever made wreaths for family and friends? Or knitted hats for loved ones in the winter? If you have, you can sell them to other people, too! Etsy is a place where people sell things – usually handmade goods. To get started, you just need to go to etsy.com and click “Sell on Etsy.”
Work a few extra years
If you feel like you’ve cut down on expenses as much as possible but still haven’t saved enough to retire the way you want, consider working a few extra years, even if it’s part-time. You can start receiving retirement benefits at 62 years old, but that doesn’t mean you have to have a hard stop for your career. A few extra years can add a solid cushion to your retirement savings. Remember that if you’re working while collecting Social Security benefits, your Social Security payments may not be what they would be if you weren’t working. In 2018, the limit on earned income for Social Security benefits is $17,040 a year or $1,420 per month.
You may be closer to your goals than you think! If you have some ground to make up, take some time to think about how you can apply these tips to help you reach your goals. If you’re on track, great! Be sure to check and see how long your money may last in retirement so you can be more confident in your savings plan.
Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc. Member FINRA/SIPC. Investment advisor representatives offer advisory services through Mutual of Omaha Investor Services, Inc.