7 Last-Minute Retirement Saving Strategies for Boomers
Written by
John Csiszar
Edited by
Gary Dudak
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Most Americans consider retirement to be a distant event for the majority of their careers. But if you’re a baby boomer and still working, retirement is likely right around the corner. This is the time to take a good hard look at your financial situation.
If you’re coming up a bit short in terms of your anticipated nest egg, there’s no need to panic. Even at this late stage, there are still many steps you can take to rapidly boost your retirement savings — but you’ll have to act now. Here are the best last-minute retirement savings strategies for boomers.
Max Out Your Employer Match
The easiest way to get “free money” in life is to earn the full employer match in your 401(k) plan. While every employer is different, many will offer a 50% match on the first 4-6% you put into your account, while some may even match it 100%.
That means if you earn $50,000 and contribute $3,000 to your 401(k), your employer may put in an additional $1,500 to $3,000, every single year. If you’re not in the position to max out your 401(k), at least contribute enough to earn your maximum employer match.
Take Advantage of the Over-50 Catch-Up Provision
Once you reach 50 years of age or older, you’re allowed to take care of what can be a very lucrative provision. The IRS allows you to contribute an additional $1,000 per year to your IRA, for a maximum of $7,500 as of 2023, or a whopping $7,500 extra to your 401(k) plan, for a maximum allowable contribution of $30,000.
More: 5 Places To Retire That Are Just Like Florida But Way Cheaper
Do the Math Regarding Working Longer
Although no one approaching retirement wants to think about working longer, it pays to do the math on just what that would mean for your long-term retirement finances. Working for even a single additional year can have significant positive ramifications on your nest egg for a number of reasons.
First off, you’d be earning an additional full year of income instead of drawing down your savings, thereby putting money into your pocket instead of taking it out. If you have a high-earning year, it could also potentially boost the amount of your Social Security benefit. Lastly, it means that you’ll have one less year of your life that you’ll have to pay for in retirement, which will make your nest egg last even longer.
Pay Off High-Interest Debt
This may not seem like a “savings strategy,” but it’s actually one of the best investments you can ever make. With most credit card interest rates now over 20%, paying down your debt can yield you a return more than twice the long-term annual average of the stock market. Carrying high-interest debt into retirement can be extremely dangerous, as balances can increase rapidly at a time when you’re living off a fixed income.
Cut Expenses To Maximize Cash Flow
Increasing income as you enter into or approach retirement can be difficult. In fact, many retirees face a cut in their incomes. But if you can manage a way to cut your expenses, it has the same effect as if you boosted your income.
Hopefully you’re already living within your means, but if you really want to boost your pre-retirement savings, try to cut down your expenses even more. Every dollar you save now can make a big difference once you retire.
Plot Out Your Social Security Strategy
While many retirees take Social Security for granted, there’s actually an art to claiming your benefits. While you can file as early as age 62, you’ll be taking a permanent 30% cut to your monthly checks vs. if you filed at full retirement age of 67 instead. If you wait until after age 67 to file, you’ll earn an additional 8% in benefits for every year up until age 70. Factors to consider as to when you should file include your overall fitness and life expectancy, your amount of outside savings and your lifestyle.
Something else to consider before you reach retirement age is that you can boost your future payout by earning more while still working. The Social Security Administration calculates your benefit in part based on your 35 highest-earning working years, so if you can sock away a few extra years of high earnings, you’ll be rewarded with increased lifelong Social Security benefits.
Consider ‘Geo-Arbitrage’
Geo-arbitrage is a phrase coined by Tim Ferrris, author of the popular book “The Four-Hour Workweek.” It refers to reducing your expenses by moving to a more affordable area.
In this way, even if you have a reduced income, you can still actually elevate your standard of living. It’s a simple way to effectively maximize your income and/or reduce your expenses without really having to do either of those. Of course, moving to a new location isn’t for everyone, but for those who might enjoy the change, it can be a great strategy, especially if you’re struggling to generate additional income or cut your expenses by other means.
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