Did you wake up this morning and realize you’re seeing your retirement creeping up on the horizon? Did it hit you that you’re not ready for that? You’re not alone, if that’s any comfort. There are still steps you can take to get ready for retirement so that you don’t end up old and broke.
Run, don’t walk, to your favorite financial advisor and get started now on a late-start retirement plan. There are steps you can take to make this right, but you’ve got to get busy.
Step 1: Don’t Panic
Up until now, your problem has been a lack of intensity about saving for retirement. Now is not the time to do a complete swing to the opposite end of the spectrum emotionally. You need to change your attitude and habits toward money management. You don’t need to freak out. You’ll need to make the most of the time you have left before retirement, so you’ll want to proceed calmly, think clearly, carefully and deliberately.
Step 2: Realize Your Retirement Plan Needn’t Span Four Decades
If you think of your retirement as something that’s going to hit you in about 15 years, it can seem pretty scary. But if you then consider that some people retire in their early forties, then you can see that it is possible to go from zero savings (those just emerging from college) to complete financial freedom (those retired in their forties) in about 15 years.
What you’ll need is a new approach to your savings and some new ideas toward your investing. That’s probably going to mean a new or additional financial advisor.
Step 3: Step Up Your Game
If you’re already 50 years old or older, you just caught a break. The Internal Revenue Service says you can tuck away thousands of extra dollars per year toward your retirement savings. The actual amount can vary year to year, so check with the IRS to find out the exact parameters on your retirement contributions to savings.
Take some risks with your savings. You’re looking at retirement in 10 to 20 years; you can’t afford to be timid. Investigate stocks or mutual funds that can help your savings grow. This can make up for some of the lost time. Talk to your investment advisor about Exchange Traded Funds, or ETF vs mutual funds for your retirement planning.
Step 4: Go For Debt-Free
Carrying credit card debt and paying only the minimum each month will torpedo your finances with interest rates. If you’re paying out all your cash on interest payments each month, you can’t save toward retirement. You need to get yourself out from under all of your debt as soon as possible. Attack your existing debt with a vengeance and don’t make more debt in the process. This will cut your mandatory monthly expenses and free up more funds that you can apply toward your retirement.
Step 5: Consider Postponing Retirement
Simply put, the longer you stay employed, the more you can save for retirement. You may even consider continuing with a part-time job during the first couple of years of your retirement. Hold off on drawing your Social Security benefits as long as you can. Each year you can do this will increase your monthly payments when you do begin accepting your benefits.