Maybe you missed the boat in starting to save for retirement earlier in life. If so, you are not alone. One in three Baby Boomers (33%), the generation closest to retirement age, only have between $0-$25,000 in retirement savings, while 21% of Americans have no retirement savings at all.
The average American spends roughly 20 years in retirement. If you are a part of the 40% of Americans who are not sure how much “20 years of money” looks like, experts estimate that you will need 70-90% of your preretirement income annually to maintain your standard of living when you stop working.
If you are used to an annual household income of $40,000, you will need between $28,000-36,000 per year to maintain your standard of living. This does not include the increased costs of living, also known as inflation. Use an online calculator to estimate the amount of money you need to save based on your current savings and the number of years until retirement.
If you are starting your retirement planning late, here are some basic tips to jump-start your financial goal.
- Create a budget. If you are not already using a budget, now is the time to put one into action. Part of creating a budget is prioritizing your spending by separating your wants from your needs. Look for expenses you could do away with or cut back on. These extra funds could then be used towards your retirement savings.
- Set up Automatic Savings. Many financial institutions have automatic account transfers that can help you to pay yourself first by transferring funds from your checking to a retirement savings account on your paydays.
- Keep Investing. Max out your contributions when a match of offered by your employer. This is a great opportunity to double your retirement investment.
- Increase your income. This may look like a second job, turning a hobby into a cash flow opportunity, or selling off extra assets. This influx of income can help you catch up on your retirement savings.
- Pay down debt. The less debt you have at the time of retirement will help you to be able to live with less income.
- Work for a few more years. Just because you have reached retirement age, doesn’t mean you have to stop working altogether. Some of the happiest people are working well past the age of 65. Maybe not in a high-stress, 40 hours a week job, but something that helps supplement their incomes. For each year you work, that is one less year you have to worry about in your retirement savings.
- Work with a financial planner. With fewer years, your retirement savings will need to have as much positive impact as possible. That is why you need an expert in financial planning. Seek out someone who is experienced, knowledgeable, professional, and mostly someone you can trust.
Whether you have very little, or nothing saved towards retirement, the day to take action is TODAY! Little steps today can lead to great benefits down thein your retirement years.
Additional retirement information:
Department of Labor: Provides information on Social Security benefits, pension plans, and tax questions. https://www.dol.gov/general/topic/retirement
My Retirement Paycheck: Smart About Money is a free 5 module online program provided by the National Endowment for Financial Education. https://www.smartaboutmoney.org/Courses/My-Retirement-Plan
U.S. Securities and Exchange Commission: Determine how much your money can grow using the power of compound interest. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
U.S. Securities and Exchange Commission: Calculate how much money you need to contribute each month to arrive at a specific savings goal. https://www.investor.gov/financial-tools-calculators/calculators/savings-goal-calculator
Connection Café: Exploring the Dimensions of Financial Wellness – Webinar: Are you interested in healthy aging? Join us for Connections Cafe and learn about the dimensions of wellness. Sessions are free but registration is required. Register at https://go.osu.edu/connecttowellness
Certified Financial Planner Board. (N.D.). 10 questions to ask your financial advisor. Retrieved from https://www.letsmakeaplan.org/how-to-choose-a-planner/10-questions-to-ask-your-financial-advisor
Consumer Federation of America. (2020). Save automatically. America Saves. Retrieved from https://americasaves.org/for-savers/save-automatically/
Federal Trade Commission. (2012)/ Coping with debt. Retrieved from https://www.consumer.ftc.gov/articles/0150-coping-debt
Jenkins, M. (2020). Accounting for your money hope chest. Ohio State Extension, Family and Consumer Sciences. Retrieved from https://fcs.osu.edu/programs/healthy-finances-0/trending/accounting-your-money-hope-chest
Northwest Mutual. (2018). 1 In 3 Americans have less than $5,000 in retirement savings. Retrieved from https://news.northwesternmutual.com/2018-05-08-1-In-3-Americans-Have-Less-Than-5-000-In-Retirement-Savings
Practical Money Skills (N.D.). Do I have enough retirement money? Retrieved from https://www.practicalmoneyskills.com/resources/financial_calculators/savings_investment/retirement_fund
United States Department of Labor. (2019). Top 10 ways to prepare for retirement. Retrieved from https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/top-10-ways-to-prepare-for-retirement.pdf
University of Wisconsin. (2018). How to choose a financial planner. Retrieved from https://www.wisconsin.edu/ohrwd/benefits/download/ret/tsa/financialplanner.pdf
Young, K. (2020). Creating a budget for your family. America Saves. Retrieved from https://americasaves.org/blog/1754-creating-a-budget-for-your-family/