…With longer life spans, inflation, and increasing health care costs, it’s possible that many retirees won’t have enough to comfortably sustain their retirements…[Here are] a few smart moves will help you catch up on savings even late in the game…
The original article by Aja McClanahan has been edited here for length (…) and clarity ([ ]) by munKNEE.com to provide a fast & easy read.
1. Change your mindset
One of the best ways to take the pressure off catching up with retirement savings is to change your mindset…In order to catch up with your savings, you need to first be more flexible with your idea of retirement. Focus can ease anxiety and make a catch-up goal more feasible for some…
If you look at retirement in this light, you may discover you have more retirement runway than you thought and that building up your nest egg is a little more possible.
2. Make catch-up contributions
If you’re over 50 years old, you can contribute more than usual to your 401(k). For 2018, employees within the age guidelines can contribute $18,500 plus a catch-up contribution of $6,000, for a total of $24,500. This approach can be even more helpful if your employer offers a match.
…Another way to save…[is via] either a traditional IRA or a Roth IRA…You can save $5,500 in an IRA…For those over 50, there is an additional catch-up contribution of $1,000, for a total of $6,500. (See also: 6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future)
3. Contribute to a health savings account (HSA)
Placing money in an HSA has many benefits and “loopholes” that make this a great addition for retirement savings.
Though HSAs were created as savings vehicles for health care expenses, there are some tax advantages and treatments that can make this type of account a supplemental retirement option. In order for you to open an HSA, you must have a qualified health care plan, like a high deductible health plan (HDHP)…
You can save pretax money and then use pretax dollars to pay for qualified out-of-pocket medical expenses…[and,] after the age of 65, you can use HSA funds for anything you want, not just qualified out-of-pocket medical expenses.
It’s also worth noting that HSAs have no mandatory distributions in retirement so you can save into your 70s, 80s, and beyond. This is helpful for anyone behind on retirement saving and needing more time to save. (See also: How an HSA Could Help Your Retirement)
4. Be frugal
You might be excited about the idea of saving more money, but wondering how you’ll actually achieve those higher savings rates. Your best bet is to reduce your current lifestyle expenses. Of course, you’ll want to adjust your spending to a level that is comfortable for you but keep in mind the ultimate goal of having enough money to support your retirement.
The options for saving money are unlimited. With some creativity and motivation, you should be able to find some frugal habits that will help you make your savings goals — everything from downsizing your home, to eating out only once per month. (See also: 6 Ways You Can Cut Costs Right Before You Retire)
5. Postpone collecting Social Security
This is another strategy that can help you earn more income during retirement. The Social Security Administration reports that postponing Social Security benefits past your full retirement age can boost future payments by up to 8% for every year the income is deferred until age 70…Few investment strategies net such a return, never mind one with a guarantee. (See also: 6 Smart Ways to Boost Your Social Security Payout Before Retirement)
6. Keep working
A 2013 Georgetown University study estimates that there will be as many as 55 million job openings by 2020 due to baby boomers retiring and leaving the workforce so the chances are there will be plenty of demand for those who want to stick around and work longer.
Fortunately, we live in a wonderful time where the internet allows people to work longer, under flexible conditions from almost anywhere in the world. If you can keep working longer, it will add to your potential to save up even more money. (See also: 4 Creative Remote Jobs That Can Supplement Your Retirement Income)
7. Keep investing
It used to be that people drastically reduced their investment portfolios in anticipation of their “golden years.” In order to reduce the risk of losing the principal amount of their savings, a retiree might be prompted to go with a very conservative investing strategy by keeping their assets in cash, bonds, or a combination of both.
Nowadays, people are living and working longer and may be able to invest and save more aggressively for longer periods of time.
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