Will I have enough money to retire? It’s a common question and one that has increased in magnitude lately — especially for people in their 40s and 50s.
Indeed, the uncomfortable truth is that only about half of Americans believe they are on track to retire when they want to, according to a recent MassMutual Consumer Sentiment Survey. And more than half worry about running out of money in retirement.
That can generate a feeling of frustration. You've been working hard for over 20 years. You've been saving as much as you can. Then, the market crashes, and your savings disappear. It’s not too late to bounce back. (Related: Where your savings should be in your 40s)
Even if you’re 55 years old and decide that today is the day to begin saving in earnest, you still have time to build up income for retirement. (Related: Where your savings should be in your 50s)
On your mark, set your priorities, go
Determine what you want out of your retirement…what are your priorities? Sit down with a pen and paper and start a list. Empower yourself to make the important decisions today that will set tomorrow in motion:
- When do you want to retire?
- Where do you want to live?
- What kind of lifestyle do you want to lead?
- Consider your current lifestyle. Can you cut back to save more for retirement?
These are just some of the questions you should be asking — and answering — yourself about retirement catch-up. So, take the first step and start making some decisions.
Save more, spend less
The most obvious advice still applies: save more, spend less. But there’s more to it than that.
Create a budget to help you stay on track — and actually stick to it every month. Decide where you can trim your expenses. What can you live without now so you can have more later? (Related: Budget essentials)
If your budget isn't working, you may want to consider downsizing to a smaller home or a less expensive location to help maintain your standard of living. This may be a difficult exercise, but remember you’re trying to catch up. The MassMutual Retirement Calculator can help.
Speaking of catching up, if you will be age 50 or older at the end of the calendar year, you can take advantage of retirement catch-up contribution options to accelerate the growth of your retirement accounts. The IRS updates contribution limits periodically; checking for the most recent information can help ensure that you are making the most of the options available to you. The bottom line: make the maximum contributions possible to your employer’s retirement plan, including any available catch-up options.
Think outside the box
There are certain financial products and savings instruments that you may not be familiar with, but that may help you get more out of your money. Many people opt to consult a financial professional to help become aware of retirement catch-up options and lay out a plan.
In addition, there may be opportunities to earn extra income, either by working extra hours or turning hobbies into side businesses, that can be considered to help catch up on retirement savings.
Delay retirement (The beach will wait for you)
People are working longer than ever before. Delaying your retirement by three years from age 62 to 65 can boost your assets significantly — thanks to the combination of making extra contributions to your employer-sponsored retirement plan, not taking withdrawals, and allowing your funds more time to grow.
In addition, if you anticipate receiving Social Security retirement benefits, it’s important to understand that monthly benefits differ substantially based on when you start receiving them and the filing option you choose. For every year you postpone collecting benefits beyond your full retirement age (typically 66 or 67), you can earn an annual delayed retirement credit of up to 8 percent. That’s a big bump in benefits every year up to age 70. (Learn more: 4 ways to delay Social Security)
On the flip side, filing for benefits before your full retirement age can permanently reduce your monthly income. Benefits will decrease based on how early you retire. What’s worse, if you begin receiving Social Security benefits early, your surviving spouse may not be able to receive your full Social Security benefit if you pass away.
The bottom line is that there are real steps and strategies you can take today to help secure your future. It’s never too early or too late to evaluate your current retirement savings plan — or create a new one.
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