Haven’t saved for retirement? It’s never too late.
In my last piece, I explained that you need to save enough for withdrawals in retirement to close the gap between guaranteed income and what you want to spend. Do you have a shortfall? Don’t despair. This next piece is for you.
First, remember, it’s never too late to get on track. That said, don’t delay either. I admit, these tough-love suggestions aren’t fun. But start today to succeed, because it will only get less fun if you wait.
Save more: If you put off saving when you were younger, you’ll now need to save a lot more annually to catch up. Some “save more” strategies:
Don’t spend more: It’s easier to save money you’re not used to having. So, whenever you pay off a loan, receive a raise or bonus at work, or come into other extra cash, direct the newfound cash flow to retirement savings.
Spend less: Maintain your likely lower pandemic level of spending. Can your vacations be more modest or less frequent? Your dining out less frequent? Your car less expensive?
Earn more: Is an extra “gig” job or side business possible? Is overtime an option? Airbnb your basement?
Invest for higher rates of return: If you have the time and tolerance to ride out the market’s near-term dips, you can earn more of the market’s long-term expected rewards by investing more heavily in stocks than in bonds or cash.
Wait to retire: There are two benefits to postponing retirement. First, you’ll have more years to fund your retirement account. Second, you’ll have fewer years to spend it. Especially if you can keep working and delay claiming Social Security until age 70, you can increase this benefit by up to 24% over what you would have received at full retirement age (age 67 for most).
In summary, if you need to catch up on your retirement savings, there’s no magic wand or time machine. So, start now: Save more, invest more aggressively, and/or wait longer to retire. Oh, there’s one other option: Spend less in retirement. It’s a free country. You get to choose. For your sake, I would choose to save and invest early and often.
John A. Frisch, CPA/PFS, CFP®, AIF®, PPC™ founded Alliant Wealth Advisors in 1995 and has over 30 years of experience as a financial professional. In his free time, he’s an avid long-distance runner, a sport that requires discipline, patience and vision. John applies these same skills to his professional pursuits: He helps families and retirement plan sponsors adopt a patient, disciplined approach to overcoming financial challenges and reaching their distant goals along a clear path. Learn more at www.alliantwealth.com.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.