No matter your financial situation, having enough money in retirement is a very common concern. It’s not just the fear of running out of money too soon. You might worry about how you’ll maintain your day-to-day standard of living while also being able to spend more time and money on your hobbies — maybe finally traveling to all those places you’ve put off seeing! After all, no one wants to envision herself eating ramen and living with a roommate in order to afford retirement.
If you’re behind on your retirement savings goals, your fears are likely to be magnified. Not having savings can feel like living on a knife’s edge. Do you cut back now? Or do you live for today and hope somehow, with a lot of belt-tightening down the road, things will come together?
Just because you’ve gotten a late, or no, start on saving doesn’t mean all is lost. You can still salvage your retirement. Here are five tips to get you inspired, help you come up with a plan to build your retirement savings, and get going on it. After all, your retirement awaits you.
1. Start Where You Are
To reach your destination, you’ll need to know what your starting point is. You can do that by writing down all your monthly expenses and comparing them with your monthly income. This can be cringe-inducing — but it’s super important to know what’s going on under your personal finance hood, so to speak. From haircare costs to utilities to eating out to housing and loan payments, try to capture all your regular expenses.
Once you know how much you’re spending, and what you’re spending it on, you’ll have a better idea of where, if anywhere, you can cut back. When I go through this exercise with clients, I find they often uncover “hidden spending,” or cash drains they were unaware of.
Pro Tip: If you’re on a roll, take it a step further and separate your expenses into Needs versus Wants. This will make it easier for you to identify areas you can potentially cut back on or cut out entirely.
2. Figure Out Your Number
This part can be trickier because each person’s number is different. It’s dependent on so many factors. Will you be downsizing from an expensive home and moving to a cheaper area? Might you want to migrate back to the city from the suburbs, where housing will be more expensive? Do you need to budget for regular visits to family in scattered locations?
You might also have chronic health conditions to factor into your post-retirement budget.
Experts give 80 percent of your pre-retirement budget as a good rule of thumb to use for planning. But the reality for some people is that their expenses stay the same in retirement. For some, they even go up.
At this point, many people consult a financial advisor to assess their situation. An expert can give them an idea of how much more they need to save and suggest strategies for how to do it. If you’re short on cash though, that might not seem like an option.
You could try using an online retirement calculator to give you a ballpark idea of how much to target saving. Just know that most of these are blunt tools that can’t take into account all the things you’ll want to consider to come up with your own personalized retirement savings goal.
Pro Tip: It is possible to get financial advice for free. Some companies offer access to financial wellness education as part of their employee benefits programs. Also, some financial advisors offer pro bono help through the Financial Planning Association.
3. Squirrel Funds Away
Your number will change as your circumstances change. But having a number to work toward can be motivating. If you don’t have an emergency savings fund, you’ll want to build that up first so that unexpected expenses don’t take you further off track with your retirement savings.
If you’re single, your emergency fund should be a minimum of six months of living expenses. If you’re married with an employed spouse, aim for half that. Once that’s taken care of, you can be more focused on dedicated retirement savings.
If your company offers a retirement plan, try to contribute at least enough to it so that you get any match your employer offers. If you’re already participating in a workplace retirement plan, you can look at adding additional retirement savings accounts to the mix.
Roth IRAs are after-tax retirement saving accounts, meaning you contribute funds to them from your after-tax income. The benefit of making contributions to a Roth is that once you hit retirement, you can withdraw those funds tax-free. (You can also withdraw funds before retirement — but you might have to pay taxes and a penalty if you don’t meet certain conditions.) Per IRS rules, to contribute to a Roth, your income needs to be under a certain amount.
If you’re not eligible for a Roth you can still open an individual retirement account (IRA). There are tax-deductible and non-tax-deductible versions of these.
Whichever account you open, setting up an automatic monthly funds transfer to it from your bank account is a great and painless way to make sure you stick to your savings plan.
Pro Tip: If you’re over 50, you’re allowed to make catch-up contributions into your 401(k), 403(b), Roth, and tax-deductible IRA accounts.
4. Create Another Income Stream
If you have the bandwidth to take on more work, you can use those additional earnings to pay down debt, if you have any, and/or to add to your savings. You might have to get creative to identify opportunities, but the list of possibilities is long, particularly now when so many things can be done remotely. Here are a few:
- Adjunct teaching
- Airbnb hosting
- Private tutoring
Care.com and Upwork are two platforms our editors recommend for finding flexible work, both in your community and online.
5. Work Longer
Working longer might seem unappealing, but so is a retirement spent pinching pennies! Assuming you are healthy enough, working a few years longer can help beef up your savings and give you more wiggle room on claiming Social Security. That’s important, because the longer you wait (up to a point) to claim Social Security, the higher your monthly benefits payments will be.
Keep in mind, too, that these days many people are transitioning into retirement. What I find in talking with my clients is that they want to keep working, but on their own terms. Maybe what that looks like for you is stepping away from full-time work at 65, but doing something you love and can make money from on a part-time basis for several more years after you officially retire.
The bottom line is that getting a late start on retirement doesn’t have to mean you’re doomed to work until you drop. With some planning and commitment, you can save your retirement.
For additional inspiration, we recommend
- 8 Opportunities To Make Extra Income In Retirement
- 7 Things I Am Doing Now To Prepare For A Successful Retirement
- All our retirement content here
Deborah Adeyanju, CFA, has been an investment manager, wine marketer, and freelance financial writer. She now works as a Senior Advisor with GRID 202 Partners, where she helps Gen X women and other individual clients design financial plans to reach their goals. Deborah is also an avid traveler, with the passport stamps, tattered travel guides, and random foreign coin collection to prove it! She counts London, Rome, and Oakland, California, among her favorite cities in the world. When not working with clients or writing, she’s usually fielding friends’ requests for wine recommendations or planning a wine-related adventure.