Are you concerned that you won’t have enough money for retirement? If so, you’re not alone. A 2017 Gallup study found that more than half of Americans are concerned about saving enough for retirement. That’s enough worry to make retirement America’s top financial concern for the 16th year in a row.1
The good news is that it’s not too late to catch up on your savings, even if you’re quickly approaching your retirement date. With some simple—but important—changes, you can overcome your savings gap and fund a comfortable and stable retirement.
Below is an effective, three-step catch-up plan. If you feel like you’re behind, make 2018 the year you finally take back control of your savings efforts. Implement these three steps. Also, consider consulting with a financial professional. They can help you develop a detailed, comprehensive catch-up plan.
Estimate your savings gap.
Before you can implement steps to catch up, you first need to see where you stand. Start by estimating your retirement funding needs. There are a number of ways to do this, but one simple way is to estimate your annual spending in retirement. Then subtract any guaranteed retirement income, such as Social Security or pension benefits.
The remainder is the amount you’ll need to fund each year from your savings. Your target should be to accumulate enough assets to safely generate enough income on an annual basis. A financial professional can help you determine what amount is sufficient to meet your spending needs. If you’re not on track to meet that savings goal, however, you need to increase your savings, adjust your goals or both.
Revisit your goals.
You may want to reassess your retirement goals to determine if they’re realistic. There are steps you may be able to take to reduce your savings target. For example, you could work a few extra years. That would eliminate years of spending that would have to be funded from your savings. You could work part time or seasonally in retirement to generate extra income.
You also might consider your planned retirement spending. For example, you might be able to reduce your funding needs if you downsize to a smaller home. Review your planned retirement budget and look for areas to cut back. If you reduce the amount you’ll need in retirement, you can eliminate a portion of your savings gap.
Boost your contributions.
Of course, the most effective way to overcome your savings gap is to contribute more money to your retirement accounts. Look for areas in your current budget to cut back so you can save more for retirement. Even a modest increase in savings can have a big impact over a long period of time.
Also, consider making use of catch-up contribution provisions. The IRS allows you to make extra contributions to your 401(k) and IRA if you are age 50 or older. You can contribute an extra $6,000 to your 401(k), for a maximum potential annual contribution of $24,500 in 2018. For your IRA, you can contribute up to a $5,500 regular contribution plus an additional $1,000 in catch-up contributions.2
Ready to develop your retirement catch-up plan? Let’s talk about it. Contact us today at Sprouse Financial Group. We welcome the opportunity to analyze your needs and help you implement a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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