Well, we are back for round 2 in our 2-part blog series about saving for retirement. Last week, we focused more on Millennials (those twenty-somethings just entering Corporate America) and how they could maximize their retirement savings by starting early. This week, the focus is on Baby Boomers and Generation X—those middle age (and maybe even older) Americans nearing retirement age and realizing they have no retirement savings.

Money GrowthObviously, one of the first things we tell clients here at Wealth Builders regarding retirement is to start saving early. The compounding power of interest can make what seems like a relatively small amount of money grow into something amazing. However, maybe you are closer to retirement age (fifties or maybe even sixties) and realize that you have a big fat goose egg in your retirement account. You fear that it is too late to start to save now and that you will be forced to work for the rest of your life and forgo retirement. Well, I am here to tell you that isn’t true. Sure, it’s going to take some hard work and discipline, but it’s never too late to set yourself up for retirement. Let’s talk about a couple of strategies focused on those who are trying to play “catch up”.

Funny that we used the term “catch up”. The IRS uses that same term. If you are under the age of 50, the IRS will only allow you to contribute $18,000 to your 401K plan. However, if you need to speed up your retirement savings, in this RARE case, the IRS is actually sympathetic. The IRS allows those over the age of 50 to contribute $6,000 MORE to their 401Ks, making their maximum contribution amount $24,000. Sure, $6,000 doesn’t sound like a lot of money, but remember the magic of compounding. If you missed my blog last week, check it out to see just how magical compounding can be! Taking advantage of “catch up” limits is the first way that you can jumpstart your retirement savings. Even if you already have a nice little chunk stashed away, catch up limits can help to further grow that nest egg as long as you can manage to scrape together that extra $6,000 per year. In addition to 401K accounts, you can also contribute to traditional or Roth IRAs. To learn more about those types of retirement accounts, check out my blogs from September and October.

Saving Money

The second way to kick your retirement savings into high gear is save, save, save! Sure, it sounds simple, but the more you can save and stash into your retirement fund, the more money you will have that can compound and grow. Now when I say “save” I mean really dig in and see how you can cut monthly spending. Sure, it’s great to nix buying lunch out every day (and every little bit helps), but I’m talking about taking a hard look at your monthly budget and seeing what major expenditures can be eliminated. Maybe you still have a large chunk of your mortgage left to pay. Could you downsize and pay off that mortgage and pay cash for your new house? If you can, you’ve just cut a MAJOR expense. By eliminating that mortgage payment every month, you’ve just freed up a significant chunk of money that you can invest into your retirement account. Plus, you will go into retirement OWNING your home which is a huge asset! Maybe you still have a car payment with a large balance. Could you sell your car and pay off the remaining balance and purchase another vehicle for cash? Again, you would eliminate a monthly car payment which frees up more of your income for your retirement savings. These are the types of MAJOR expense cutting I am talking about. Every situation is different, so sit down and take a look at your monthly budget and see what things you can eliminate.

Now that you have more money, you can invest more into your retirement savings accounts. But, make wise investment choices! If you don’t feel comfortable managing your own portfolio, find a financial advisor with a trusted reputation (Wealth Builders would LOVE to help!). Many people make the mistake of being TOO risky with their investments. They feel that, because they have started late, they need to make up for lost time. They end up making the mistake of choosing investments that are too risky. They are lured in by the prospect of the high (sometimes double digit) returns that COULD BE earned if the stock market were to cooperate. When the stock market fails them, they end up losing their investment which was meant for retirement.

Delay Social SecurityAnother way to increase your retirement savings is to consider working a few extra years and delaying Social Security withdrawals. If your health will allow it, think about working for a few extra years. By doing this, you are not only decreasing the amount of time your retirement will have to be stretched for, you are also continuing to contribute to your retirement without making any withdrawals. Your account continues to grow untouched for the few extra years you continue to work. This brings us back to the power of compounding yet again. I know I keep mentioning it, but compounding means growth which means a larger retirement account balance for you! Also, consider delaying taking Social Security. By doing so, you can increase your monthly benefit amount as well as your total lifetime benefit amount. For every year after age 66 that you delay Social Security, your benefit payout amount will increase 8%. This amount continues to grow until it maxes out at age 70. This means that you can increase your lifetime benefits by 32% by just waiting to begin taking Social Security until 70.

Finally, when the highly anticipated time to retirement arrives, consider taking on part-time employment. Many people DREAM of the day they don’t have to punch the clock every day, and when it finally arrives, they actually miss it! I’m not saying go out and work 25 or 30 hours a week in a stressful environment. I’m saying find something you would ENJOY and something that is very part time, maybe 2 or 3 days a week for a few hours each day. Not only will this keep you engaged with something to do, it can also help to stretch out those savings so that they can last longer. By having a low-stress job for a few hours a week, you can help to supplement your retirement savings. Because you won’t be withdrawing as much from the account, the money in the account will have more time to—you guess it—compound!

Saving for retirement at any point in life can be stressful to think about. The uncertainty only gets more stressful as you get older and realize you may not be as ready for retirement as you had hoped. Instead of stressing out, give Wealth Builders CPAs & Consultants a call. Our team of financial experts can sit down with you and develop a plan to meet your financial needs in retirement. And the best part—the consultation is FREE! It’s never too late to start saving! Give us a call!

Remember, stay in the loop with the latest scoop on retirement savings tips and all things accounting! Follow us on LinkedIn, Twitter, and Facebook!

“60 Years Old With Zero Retirement Savings.” Dave Ramsey, www.daveramsey.com/blog/60-years-old-zero-retirement.

Frankel, Matthew. “What Are the Maximum 401(k) Contribution Limits for 2017?” The Motley Fool,  17 Dec. 2016, 6:47AM, www.fool.com/retirement/2016/12/17/what-are-the-maximum-401k-contribution-limits-for.aspx.

Pant, Paula. “How to Save for Retirement When You Got a Late Start.” The Balance, 5 Nov. 2017, www.thebalance.com/saving-for-retirement-with-a-late-start-453986.

Slayen, Craig. “Why You Should Delay Social Security Benefits.” Kiplinger, Jan. 2017, www.kiplinger.com/article/retirement/T051-C032-S014-why-you-should-delay-social-security-benefits.html.

Stephens, Craig. “7 Retirement Catch-Up Strategies for Lifelong Procrastinators.” U.S. News & World Report, 20 Oct. 2017, 9:58AM, money.usnews.com/money/blogs/on-retirement/articles/2017-10-20/7-retirement-catch-up-strategies-for-lifelong-procrastinators.