Short on Retirement Savings: 3 Options to Catch Up

​If you’re approaching retirement and feel like you don’t have enough in savings, you have company. A recent study from the Transamerica Center for Retirement Studies found that baby boomers have a median retirement savings balance of only $147,000.1 That figure is likely to be well short of what most retirees need to fund their desired standard of living.
 
Retirement has become an increasingly difficult financial challenge. Most workers no longer have the benefit of a pension. Retirees also have to contend with a longer life span, which means they may need to fund more years in retirement. Health care is also a substantial area of expense.
 
The good news is that it’s never too late to correct course and get your retirement back on track. With some careful planning, you can take back control of your retirement. Below are three steps you may want to consider. A financial professional can help you analyze your needs and implement the best course of action.

Delay your retirement for a few years.
One of the most effective ways to overcome a savings gap is simply to work past your planned retirement age. If you’re planning on retiring at age 62 or 65, consider what could happen if you worked a few years more and instead retired at 67 or even 70. Those extra years of work give you more time to save and reduce the number of retirement years you have to fund with savings.
 
Working beyond traditional retirement age provides another important benefit. It may allow you to delay your Social Security filing. Social Security offers an 8 percent increase in benefits for every year past your full retirement age (FRA) that you wait to file. You can delay all the way to age 70, which means you could earn a cumulative 32 percent increase in your Social Security payments.2 That extra income could also help you overcome your savings shortfall.

Max out contributions to qualified plans.
Another potential strategy is to increase your retirement savings amount each year. While you may feel that you’re already saving as much as possible, it’s likely you can find more money to save if you make cuts to your expenses. Take a look at your budget and find areas where you can cut back.
 
If you’re age 50 or older, you can take advantage of catch-up contributions to put more money into your qualified accounts. In 2018 you can contribute as much as $18,500 to your 401(k). However, those age 50 and older can contribute an additional $6,000. Similarly, people age 50 and older can put an additional $1,000 into an IRA, on top of the standard $5,500 limit.3

Look for ways to cut your planned spending in retirement.
If you’re already saving as much as possible for retirement and can’t push it back any further, you may need to rethink what your retirement will look like. Think of ways you can cut your living expenses in retirement. For example, you could downsize to a more affordable home or move to an area with a lower cost of living.
 
Also, don’t rule out the possibility of working in retirement. While a job in retirement may not sound appealing, supplemental income from a part-time or seasonal job could help you make do with less savings.
 
Ready to catch up on your retirement planning? Let’s talk about it. Contact us today at Rex Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

 
1https://www.rothira.com/average-retirement-savings-age-2017
2https://www.ssa.gov/planners/retire/delayret.html
3https://www.forbes.com/sites/ashleaebeling/2017/10/19/irs-announces-2018-retirement-plan-contribution-limits-for-401ks-and-more/#5b5edb7b25ac
 
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