If you get stressed out when asked about your retirement savings you’re not alone. In a recent study by the Economic Policy Institute roughly half of American families have no retirement savings at all, and for older workers between 50 and 55 years old the median savings is only $8,000.
Although these facts are startling and you may be a bit behind on your savings after skipping a few months or years, there still is hope!
The good news is, regardless of where you are in your career or stage of life you can get back on track for retirement savings but it will require some sacrifice and massive action. Being aware that you need to take responsibility for your savings is the first step for regaining control of your later years.
Below are the top strategies for getting your retirement savings back on track.
Establish a Budget
If you don’t already have a monthly budget you need to get started creating this right away.
Your budget should give you a good understanding of how much money is coming into your accounts and where it is going.
Knowing your monthly budget will allow you to see how much money you must put towards expenses, where you can afford to cut on spending, and how much you can expect to save for each month.
Once you have a clear picture of where your money is going you can then create a plan for working towards building your savings account.
Setting up a budget is simple and can be done over a weekend. You will need to create a spreadsheet and then outline how much money you make each month and add in all of the items you spend money on in a month. It’s helpful to break down your fixed costs: rent, mortgage, car payment, bills, etc and then estimate or look through your statements for other items you have spent money on. This may include meals out, events, gifts or other entertainment. Once you have a budget created you have a map for growing that savings account.
Eliminate Debt And Start Saving
Your budget will give you an outline of where you need to improve your spending and saving habits. It will also show you where you can cut back on excess spending. For example, cutting out 4 restaurant meals per month and a gym membership could provide an additional $150/mo to put towards debt payments or savings.
Carrying debt into retirement is not a secure way to transition into your carefree years. It is essential to eliminate any outstanding debt you have and to begin saving at least a percentage of your take-home pay as quickly as possible.
Debt consolidation is the process of combining all your unsecured debts into a single monthly payment. Generally, this allows for much lower payments on a monthly basis than the sum total of the separate debts – making life a lot more manageable. The likelihood in these circumstances of reducing interest rates is very high, and there are many firms out there who will walk you through the process making it simple and painless.
Invest Wisely - Go Heavy on Stocks
As you work to get rid of the debt you should also be looking to invest heavily at this time as well. You should take advantage of any 401K retirement plan being offered by your company if you haven’t already, and also look to open up an IRA account as well. 15% of your income should be your investing target each month. If you can only afford 5% or 10% start with that and work on increasing this figure as you eliminate debts and cut back on other spending.
Once your savings strategy is in place you can look to invest more aggressively. It's estimated that 60% of workers invest too conservatively for retirement, and as a result, they reduce their savings growth potential. A better bet? Fill your portfolio with stocks. Taking this action will allow you to accumulate wealth more quickly without having to take on unnecessary risk.
Even if you don't have 30 years of work ahead of you — say you're already in your late 50s or 60s — you can still feel relatively secure putting most of your money into stocks if you're not planning to retire for about 10 years. And that's a great way to buy yourself more financial security as a senior.
It’s Never Too Late
Although it may seem daunting, you can’t let your regrets about avoiding your retirement savings hold you back. Having a strategy and following it will help relieve that sense of hopelessness you have about your retirement plan. Taking action today is one of the most important things you can do.
Regardless of your current status on retirement savings, there's never a problem of having too much money during your golden years. If you're able to create and strictly follow your budget, cut excess spending and expenses, and invest strategically, your nest egg will get the boost it needs to bring you the comfortable retirement you deserve.
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