If you’re behind in retirement savings, you’re not alone. One-quarter of Americans aged 50 to 64 have zero saved for retirement. That’s right. They having nothing saved for a retirement coming very soon. But that’s not all. Thirty-six percent of adult Americans having nothing saved for retirement.
These are very sobering statistics considering that Social Security is very likely not enough to cover all the expenses of retired people. Financial experts recommend saving as early as possible for retirement and saving as much as you can.
People are behind on their retirement for many reasons. Primarily, they are spending what could be retirement savings on other expenses. So the trick in catching up is either eliminating or reducing those other expenses, and then diverting the bucks to your retirement fund.
Here are six ways to do that.
1) Start Pretax Savings Now
Pretax savings for retirement mean you can save more as a percentage of your income without seeing significantly less money in your paycheck. It may also place you in a lower tax bracket, thus saving on yearly taxes. If you have access to an employer 401k plan, start saving as much as you can in it immediately! You can save up to $18,000 every year. If you’re 50 years old or older, you can put in an additional $6,000.
They are great deals for retirement. If your employer has a match, you are throwing money away by not participating. If you can save even two percent of your income, they will match two percent.
If you don’t have access to a 401k, open an Individual Retirement Account (IRA). Working adults can contribute up to $5,500 pretax in an IRA. Folks 50 and older can contribute an additional $1,000 every year.
2) Eliminate Non-Mortgage Debt
If you have debt service every month, whether from credit cards or a car loan, cut it way down. Make every attempt to get it to zero. Then, shift the money you are currently paying in debt service to savings for retirement.
For credit cards, see if you can shift to a credit card with lower interest rates or get a personal loan with lower interest to pay off the credit cards. The lower the interest rate, the further your payments will go.
If you need a car, see if you can purchase a high-quality used car so your loan payments aren’t as large. Used cars without much mileage can be significantly less expensive than new cars.
3) Cut Back on Living Expenses
It’s time to do some serious thinking on your living expenses. If you don’t have enough saved for retirement, you need to start. If you can even cut back by $50 or $100 per month, it adds up. Use this Benefit of Spending Less calculator to visualize how much you could end up saving just by reducing your budget.
Look at every category of your spending. See where cuts may be made. Do you have two cars? Is the second one necessary? If you take vacations once a year, can you make the destination a less expensive place? Do you like to eat out twice a week? Can it be pared down to twice a month? Could you sign up for a less expensive cable package and rent DVDs from your local library? These are the kind of questions you need to ask yourself — of every item in your monthly expenses.
4) Downsize Your Home
Especially for those a decade or less from retirement age, it might make sense to downsize your home. Mortgages are major expenditures for most people. A mortgage on a smaller place, or paying outright for a smaller home with what you received from a sale of your last one, can potentially save hundreds per month.
This works for many adults whose children are now adults. You may need less space, and it can benefit you financially to live in less.
5) Save on Property Taxes
Property taxes, too, can cost hundreds per month, depending on where you live. But in another state or another municipality, property taxes can cost much less. If you are looking to downsize to save money on the mortgage, don’t neglect the property tax side of the picture. Research what property taxes are in various locales you’re interested in.
In addition, some municipalities and states offer tax breaks to people over 65 years old. Even if you’re years from that age, it can pay you to find out if places you’re considering moving to have these programs. They can be very beneficial down the road.
6) Earn More Money
While the first five recommendations in saving more for retirement all center around paying out less in expenses, let’s not neglect the role of more money in retirement savings. You may not be saving enough for retirement simply because you don’t make enough to live comfortable and save.
Make a plan to earn more money! It could be applying for a promotion, asking for a raise or developing a side gig (consider starting your own LLC online today). Figure out your best path to getting more money in every month.
More than a third of Americans haven’t enough saved for retirement, including one-quarter of those between 50 and 64 years old. Don’t despair, though. If you haven’t saved for retirement, these six ways will help you begin a nest egg for the years to come.