Retirement Planning If You Started Late
There can be many reasons for starting to save late. Not everyone hits the jackpot and a stable job in their 20s or 30s. Some people are occupied with family duties, some struggle to pay off student debt, and some are just complacent. Regardless of the reason, the importance of retirement planning cannot be stressed upon enough. And as the saying goes, it is better late than never. If you have started saving for retirement at a later stage in life, here are some things you can do to speed up the process and make up for the lost years.
10 Important Financial tips to follow for Retirement Planning if started Late
1. Save whatever you can
To make up for the absence of a plan in the past, you need to save as much as you can now. This can literally mean saving every penny you can spare. Try to make adjustments where you have scope and put it all in your savings. Little changes like using public transport, cutting down on expensive meals at fancy restaurants, and other measures of living a frugal life, can help you fill up your retirement pool over time.
2. Postpone your retirement
Instead of retiring in your 60s, retire in your 70s. This will give you more time to save. This concept is steadily gaining popularity as the 70s are being touted as the new 60s. However, this may not be possible for everyone. Sometimes, health concerns or other commitments may not let you postpone your retirement. In this case, try to find an alternative source of income. You can take up a part-time job or freelance a few hours a week.
3. Find another source of income
You don’t have to wait till you retire to find another source of income, you can do it even before you reach retirement. Having a part-time job, or taking up freelancing gigs, can be a good way to double up your savings fund. You can also think about having your own business on the side. However, this may require you to invest a substantial amount of money first. Another possible source of income can be real-estate. If you own property, you can sub-let it to earn some extra money.
4. Branch out your investments
The Internal Revenue Services (IRS) has specific limits for each retirement account that contributors need to follow each year. Even if you are late to saving, you will still be restricted by these regulations and will only be able to contribute a certain amount every financial year. To overcome this problem, you should try to invest in different accounts and methods. For example, instead of sticking to one account, you can contribute to a retirement account, a certificate of deposit, and a savings account in the bank.
5. Make wise investment decisions
Don’t panic if you find your savings inadequate for retirement. Worry can lead to risky investment decisions that may not always work out in your favor. Instead, if you want to invest rigorously, consult a financial advisor and find out the right options that can help you grow your money over a period of time.
6. Cut-off debt
Don’t add on to your debt during this phase. If you have plans of buying a house, or a car, for which you may require a loan, you may want to rethink your decision. Taking up new loans will only add to your burden. The added interest will further interfere with your retirement goals. You should also avoid using a credit card. Debt can eat away your savings faster than you think.
7. Have a realistic goal
You should be practical about where you stand and how long it will take for you to achieve your retirement goals. Here’s a calculator to find out. Understand that you have a limited time to save up for retirement. Having unrealistic goals can be frustrating and may make it harder for you to focus on. Think of the most important expenses like healthcare, etc., that you may encounter in retirement, and save accordingly.
8. Buy insurance
Insurance premiums may sound like an added expenditure right now, but insurance can be very useful in times of emergencies. An unforeseen health emergency can leave you bankrupt. Social Security and Medicare, alone cannot be enough to cover all health costs. Insurance, on the other hand, is an effective tool to tackle these expenses.
9. Don’t lose hope
Nothing is impossible. Starting late can be challenging, but it is not unachievable. You can still cover up and live a comfortable post-retirement life. Making a few adjustments to your current lifestyle and being a little more cautious with your money can prove to be far more beneficial than you can imagine.
10. Think of yourself first
This may sound selfish, but making sure you and your spouse are financially sound is more important than worrying about your children’s education. There are several ways for your children to get the education they want, but not as many income options for your post-retirement. If you are stuck in an either-or situation, keep your financial security as a top priority.
To sum it up
Saving money is important. Your saved money will probably be your only source of income in retirement. But different strategies can be applied to retirement planning depending on when you start. The most important thing still remains to be consistent and disciplined.
If you are late for the journey of retirement planning, reach out to a financial advisor. They can help you find a strategy best suited to your income and future needs.