How To Begin Saving For Retirement At An Older Age

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The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

There is a crisis facing our nation.

Even though the stock market is near record highs and the economy is showing signs of improvement, many workers in the U.S. have not been able to save nearly enough to be able to have a comfortable retirement. According to a report released by the Employee Benefit Research Institute, nearly 30% of Americans have no confidence that they will have enough money saved to be able to retire comfortably.

Individuals that are trying to save for the future and make their money last are facing a number of powerful financial and demographic forces that make their task very difficult. Rising life expectancies and inflation are ensuring that workers will have to stretch their retirement savings to the max to make ends meet. There are few that can count on a pension from their employer when they retire, and the money obtained from social security payments is not nearly enough to replace an income from working. It is estimated that most people will need 75% to 85% of their current annual income to maintain their lifestyle during their retirement years, while social security payments will only replace about one-third of their income.
So how can you avoid having to work until you are 75? By taking steps now to increase the amount of money you are able to save before you retire. These steps may not be able to ensure that you have the amount of money you want by the time you reach retirement age, but you will increase your financial security to the point where you will not have to be afraid that you will never be able to retire.
If you truly stick to these tips and save as much as you are able, you should be able to retire within a few years of your current target retirement date.

Reduce Your Expenses

One of the best ways to save more money for your eventual retirement is to reduce your current expenses to free up more of your income. Most people have a number of things that they pay for regularly that provide them with very little benefit for their money or doesn’t really add to their quality of life.

Examine your monthly expenses carefully to see if there are items that you can eliminate easily. Some people choose to cancel rarely used gym memberships, while some others choose to downgrade their cable package or take their lunches to work instead of eating out. Whatever money is saved should be deposited into your retirement savings account.

Try To Increase Your Income

If you have delayed saving for retirement, you will need to save more to make up for all of the compounding interest that you missed out on earning. Try to find ways to increase your income so that you can dedicate more money to your retirement savings.

When you receive a raise or a bonus at work, consider increasing your contribution to your retirement fund before you begin spending the money on other things. Your future self will thank you for your frugality.

There are many other methods that you can use to increase your income and have more money available for saving for retirement. Taking a part time job for minimum wage at some retailer is not your only option. Some people turn their hobbies into money making ventures, like woodworking, baking or needle crafts. Other people choose to use the skills that they’ve learned throughout their lives to help their friends and neighbors, earning money babysitting children or helping with home repairs. The money making method chosen will depend on your own personal preferences.

Eliminate Your Debts 

Debt will continuously be a drain on your finances. If you are carrying large amounts of debt, the best course of action for you to take will be paying off your debts as quickly as you can so that the money that you were paying in interest can be redirected into your retirement savings account. Every year, large banking institutions earn billions of dollars on the interest they are charging on consumer debt. Instead of securing the future of the bankers, pay off your debts so that your money can go towards making your future better.

Increase Your Contributions To Your Retirement Accounts

Since you are trying to save a lot within a short time period, contribute as much as you can towards your retirement accounts whenever you can. For 2013, the maximum contribution limit for a 401(k) or similar plan for most individual contributors is $17,500. If you are over the age of 50, you can contribute an additional $5,500 each year as a catch-up contribution, for a total of $23,000 annually. For individual retirement accounts, such as a Roth IRA, the maximum contribution limit for 2013 is $5,500. You can contribute an additional $1,000 to the account annually if you are past your fiftieth birthday.

Choose Additional “Safe” Investments

If you believe that you are very far behind in saving for your retirement, you may want to consider choosing additional investments with little risk to bolster your retirement savings. Investing in certificates of deposit, bonds or rental properties can help you ensure a comfortable retirement if the money in your retirement accounts are not quite enough when you are ready to retire. Do not choose risky investments, as you do not want to take a chance on losing a large amount of money so close to your target retirement date because of a steep market downturn.
By following these steps, you can ensure that you have a significant amount of money available to put towards a comfortable retirement.
How about you all? Are you using any of these strategies? How have they worked out for you?

Do you feel pretty comfortable that you will have saved enough by the time your retirement rolls around?

Share your experiences by commenting below!

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  1. I plan on increasing my contributions to my retirement account as I get increases in my salary. My hope is that I can someday max out my contributions to my 401k. The best time to start investing is when you are young, the second best time to start is NOW!

    • Thanks for sharing FreeMoneyMinute!

      Does your employer offer any matching for contributions to your retirement account?

      Also – do you contribute to a Roth IRA?
      My recent post How To Begin Saving For Retirement At An Older Age

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