Isn’t it funny the way time seems to fly by as you get older? Well, it’s not so hilarious if you’ve failed to save for retirement, which is now quickly approaching. If you have just woken up with the heart-stopping realization that you have no money set aside for your golden years, you’d better do something about it ASAP.
You might find some comfort in knowing you’re not alone; don’t. Although 30 percent of workers over 55 have less than $10,000 in their retirement accounts, it doesn’t mean anyone is getting a break. You can still hustle and get your retirement plan in order, but it won’t be easy.
Retirement Planning: How Much You’ll Need
There’s no concrete number that should be applied to everyone’s retirement saving goals. It all depends on what kind of lifestyle you plan on living after employment. However, putting away at least 15 percent of your gross salary, including employer contributions, toward retirement has been recommended consistently.
Of course, putting away more that 15 percent is even better, but you probably wouldn’t be reading this if you had done so. Using a retirement calculator that factors in details such as your salary, life expectancy and the return you’re currently earning on investments will help you pinpoint an appropriate goal for yourself.
1. Make 401(k) and IRA Catch-Up Contributions
You’re lifestyle as it stands now is going to take a hit no matter what. Whether you’re 30 or 60, you have to start putting away pretty big portions of your paycheck in order to save enough in time for retirement.
Luckily, the IRS did grant last-minute savers the catch-up contribution, which could be the key to stuffing a little more into your retirement portfolio.
The amount you can contribute to a retirement plan each year is limited. As of 2014, the maximum contributions are $17,500 for a 401(k), 403(b) or 527 and $5,500 for a traditional or Roth IRA. However, if you are over the age of 50, you can add an extra $1,000 per year to your IRA — for a total of $6,500 — as well as an additional $5,500 to a 401(k) for a maximum annual contribution of $23,000.
2. Retire Later
You might not have a choice by the time retirement rolls around, but waiting until you’re a few years older to retire will give you some extra time to earn more income and save what you can.
Note that once you turn 70 1/2, you must begin making a required minimum distribution (RMD) from any IRA you hold each year and pay taxes on the withdrawal. Just remember you don’t have to spend it.
3. Delay Social Security Benefits
You might be tempted to begin collecting Social Security benefits early, especially if your nest egg is looking less than sufficient, but waiting can significantly increase your payout.
Right now, full retirement age is set to 67. You can opt to collect benefits as early as age 62, but the benefit amount will be cut–the earlier you collect, the greater the penalization which can reach a 30 percent reduction in benefits.
Conversely, if you wait past retirement age to collect a check, you are awarded delayed retirement credits. Delaying benefits until age 70 (the maximum) will result in up to an 8 percent annual increase in payout.
No matter what you do, do something. Some retirement cash is better than none, but the sooner you begin making sizable contributions, the more likely it is you will enjoy the next phase of your life post-employment.
Photo credit: 401(k) 2012