Published: September, 2020
The one-two punch dealt by the Great Recession of 2007-2009, followed by economic damage from the COVID-19 pandemic may have affected your retirement savings.
It does not take national economic catastrophes to throw a plan off-track. Personal setbacks from unanticipated medical bills, job losses or marital strife can derail the best intentions. Add in paying for a child’s education, and it is not surprising that many plans go awry.
Experiencing hardship during these events does not mean you cannot get your retirement back on track. In some cases, you may be able to turn things around so that your future looks even brighter. These are things you can do now to help you do just that.
Investing for Your Retirement
Retirement is coming. For some people, it is happening at the speed of a runaway train. While others fear it will never quite arrive. If you are not sure your savings are up to the challenge, it is not too late to make additional investments in your retirement. Here’s what you need to know.
- Consider catch-up contributions. Fortunately, the IRS realizes that rainy days happen. They have given you an “out,” if you will, that allows you to make “catch-up” contributions in the years as you approach retirement age. In 2020, the 401(k) catch-up contribution limit is $6,500 per year. For an IRA, you can contribute an additional $1,000 per year. Taking advantage of this opportunity allows you to grow your retirement funds in the years leading up to it.
- Explore the gig economy. Consider taking on a “side gig,” as we currently live amid the “gig economy.” If you have not heard of it, now is your chance to explore how additional earnings may impact your retirement plans. Put your experience, expertise or simply your time to work to make extra money. Becoming a ride-sharing driver or grocery delivery driver are just two options.
- Retire later. This simple solution can help you maximize your retirement savings, beginning with your Social Security benefits. For instance, if you begin receiving your Social Security retirement benefits at age 66, you only receive 100 percent of your benefits. However, if you wait four additional years and begin receiving your benefits at age 70, you’re entitled to 132 percent of the monthly benefits. Time, after all, is an investment too.
One thing you will want to do is hire a financial advisor to guide you toward sound financial decisions as your retirement age approaches.
Ways to Save
Saving money, of course, gives you additional funds to invest in your retirement. There are many steps you can take to reduce your spending. Use those savings to increase your investments as you approach your golden years. Here are a few options:
- Cut the cable cord. With many streaming services available free of charge, you do not really need cable anymore.
- Cook at home rather than eating out. This is a huge expense. Reducing or eliminating it could save you an enormous amount of money and help you fall in love with cooking. Even using a meal service that does the shopping for you can help you eliminate waste and cut costs.
- Downsize your lifestyle. If you are a two-car household, consider going down to one, especially if you are retired already. At the very least, consider paying one loan off so that you only have one car note.
The idea is to make lifestyle changes that allow you to spend less each month and invest what remains.
There are steps you can take to get your retirement back on track if you've encountered road blocks, it just takes time and effort.