You’ve probably heard of the old phrase, “time is money,”, especially in the business world. Time is something that many investors are missing out on especially when it comes to retirement planning.
Lorie Konish with CNBC writes that a recent Bankrate survey astoningishly found that 36% of respondents had never had a retirement account. In turn, not saving enough then becomes a huge regret for many people. What causes that remorse? Every year your investment dollars don’t go out to compound, you could potentially cost yourself tens of thousands of dollars for the future.
Granted, everyone’s situation will be different, with potential obstacles in the way like lack of access to a retirement savings plan at work, saving for big-ticket items like a home or college education, paying down debts, and more.
So if you’re finding yourself playing catchup Lorie provides some simple tips to get rolling.
Boost Your Savings Rate
How much is enough to save? Many experts try to advocate for at least a 15% rate. As part of their retirement plan, many employers will also offer an employer match, which experts advise trying to save at least enough to get that. Otherwise, you may be leaving free money on the table. You might need to save even more if you’re investing on behalf of your spouse Konish recommends. If that’s still too much, Greg McBride, chief financial analyst at Bankrate recommends even boosting a little at a time as you receive raises or promotions.
Invest In An IRA
As mentioned above, you might not have access to a retirement plan at your place of employment. As long as you or your spouse have earned income, you can open up an individual retirement account on your own and save that way McBride said.
Even better if you’re a younger worker, the opportunity to be able to save in a Roth IRA with money that was already taxed could enable you to save even more with decades of compounded tax-free growth. There are limits to those contributions though.
In 2022, workers can save up to $20,500 in their 401(k) plans, and both traditional and Roth IRA’s come with limits of $6,000 in contributions. However, if you’re 50 and over, you can make catch-up contributions – an extra $6,500 for 401(k) accounts and another $1,000 for IRA’s.
When all else fails, if you’re near retirement age, consider working a little longer. However, that doesn’t mean you have to wait till your 50’s and 60’s to do so (or even later). McBride said that even an extra year or two can help solidify your retirement security. This can in turn give you more time to save even more, and let your assets grow accordingly.
Don’t Claim Social Security Just Yet
Also working longer can delay you from needing to claim Social Security. Doing so can help boost your respective Social Security monthly benefit check as well.
While eligible workers can first claim at age 62, doing so will result in reduced benefits for life.
If you can hold out until 66 or 67, you can receive 100% of the full benefits earned. Then for every year waited until age 70, benefits can go up even more. The difference between claiming at age 62 vs age 70? As high as 77%!
“You basically get a permanent pay raise every year you’re able to delay taking Social Security from age 62 to age 70,” according to McBride.
So if you’re behind on retirement savings, it can certainly feel daunting to play catch up, but it doesn’t have to be a never-ending climb either.
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