5 Smarter Ways to Save for Retirement When You’re Behind

Time seems to fly by like a speeding train. It feels like you graduated from high school yesterday, but then you blink and get an email about your 25th reunion. Another blink, and you have two kids. When did all that happen? You might feel this way especially when you look at your retirement fund. Years passed in the blink of an eye, and now you’re behind on your retirement savings.

If this describes you, don’t get discouraged. You can still enjoy an inspired retirement. Depending on your age and income, you can make up for lost time and catch up on your retirement savings. Even if you’re close to retirement age, you can make changes that will allow you to feel secure about your financial future.

save for retirement

1. Get Rid of Debt

Debt payments are stealing from your future. Get mad! Then decide to get rid of debt.

Use the debt snowball method. When you’re done, all that extra cash can go toward your retirement.

And, yes, pay off your mortgage. You might get a tax break from mortgage interest payments, but that deduction might be less than the interest you’re paying every year, so you could save more by getting rid of the debt entirely. Imagine how much money you could put toward retirement if you were debt free. That could fund an inspired retirement for sure.

Read: The Procrastinator’s Guide to Retiring Rich

ramp up your savings

2. Ramp Up Your Savings Rate

Look at the percentage of your salary you’re putting into your company’s retirement program if you have that option. The second thing to check is whether or not you’re taking full advantage of any company match. Your company might match your contribution up to a certain percentage of your income. If your company matches 4 percent, but you’re only investing 3 percent, you’re missing out on free money.

If you’re like many people, you participate in a savings program ― but you aren’t investing enough. Once you’re debt free, you need to invest at least 15 percent of your annual income for retirement. Saving 7 percent or 8 percent of your net pay isn’t enough.

Generally speaking, you can contribute $18,000 a year to a 401k. If you’re 50 or older, you can use the catch-up option and increase your contributions to $24,000 a year, according to the IRS. There are some income restrictions, though, so research your options before making changes.

If you are intensely inspired about your retirement, you can also contribute to an individual retirement account ― either a traditional IRA or a Roth IRA. You can invest up to $5,500 a year if you’re under 50 or up to $6,500 if you’re 50 or older. You might not be able to max out your contributions every year, but putting away a little extra is better than nothing.

scale down lifestyle

3. Scale Down Your Lifestyle

In order to ramp up your savings, you might need to say goodbye to some of the extras you’ve come to enjoy. Drink office coffee instead of spending $6 a day on lattes. Ditch all those cable channels and use a streaming service instead. Stop trying to keep up with the Joneses ― they’re up to their eyeballs in debt.

As you get raises and bonuses, keep your lifestyle the same. Making more money doesn’t mean you need to spend more money.

Keep Reading: How Much Do I Need to Retire?

downsize home

4. Downsize Your Home

Moving might seem extreme, but it might be the best choice, especially if you are empty-nesters with more house than you need. Use the profits from the sale to pay off debt, buy a smaller home or condo, and throw any extra into your retirement savings. You might even consider relocating to another part of town ― or another part of the country ― with a lower cost of living.

Feeling attached to your home is understandable. You’ve made memories inside those walls. But memories can’t pay the bills when you’re retired. Besides, it’s not the location that matters; it’s the people you’re with. You can create new memories wherever you are.

retire later

5. Delay Retirement Until Age 70

You probably want to retire as early as possible. But if you’re behind on your retirement savings, you might have to work longer than you originally thought. There are two reasons you might want to hold off on retiring for a few years: compound interest and Social Security benefits.

Your investments have more time to grow. Time and compound interest are critical components to successful investing. You might not think working and investing an extra five years would matter that much, but here’s an example of what a difference a few years can make.

Say you put $1,000 in a money market account that gives you 3 percent interest a year. In one year, you’d have $1,030. In five years, you’d have roughly $1,160. Time plus compound interest equals more money ― and that example is with just $1,000 in a money market account. Think about what an extra five or 10 years could do to help your savings to grow.

Delaying retirement until age 70 can mean more Social Security benefits. Some people assume that they must sign up for and start taking Social Security payouts at the “full retirement age” set by the government. The earliest you can take benefits is age 62, but your benefits will be reduced.

Currently, full retirement age is 67 for those born in 1960 or later. If you wait until age 70 to retire, however, you might qualify to get more than 100 percent of your benefits. For example, anyone born in 1960 or later who delays retirement until 70 might qualify for 124 percent of the amount you would have received had you started taking benefits at full retirement age. That’s a lot of money.

Keep in mind that the rules for Social Security are everchanging. So, as you get closer to retirement age, stay informed. You don’t want to be caught off guard.

Related: Haven’t Turned 60 Yes? You Can Still Save $430,453 Before Retirement

Catching up on your retirement savings means sacrificing some extras right now ― like a huge vacation or a newer car ― so you can enjoy the benefits later. You can’t change the past, but you can prepare for a secure and dignified future. If you stay focused on your goal and keep working your plan, you can enjoy a dream retirement.

A popular and dynamic speaker on the topics of personal finance, retirement and leadership, Chris Hogan helps people across the country develop successful strategies to manage their money, both in their personal lives and businesses. His new book, Retire Inspired: It’s Not an Age; It’s a Financial Number, was released in January 2016 and is a No. 1 national best-seller. You can follow Chris Hogan on Twitter at @ChrisHogan360 and online at www.chrishogan360.com.

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