Saving for retirement is one of the most important financial goals. In the old days, people would work for one company for thirty or forty years and then would be able to retire comfortably with a pension and social security. However, times have now changed both in retirement planning and how long people stay at their jobs throughout a career. There are many priorities that pop up during life, such as a child's college, that get in the way of retirement savings. If saving for retirement has taken a back seat in your financial planning, there are several steps that need to be taken in order to get back in the black and prepare for the day when retirement comes. The sooner these steps are implemented, the sooner you can retire.
Stay At Your Day Job Longer
Perhaps the simplest way for a person to earn more towards retirement is to stay working longer. If a person is making $60,000 a year and they decide to stay on the job four years longer, that is nearly a quarter of a million dollars in gross income they would not otherwise have. If you do not have enough saved to retire comfortably, this is a good option to think about. In addition, waiting to start withdrawing from Social Security means that the paychecks received will be higher than if a person starts drawing as soon as they are ready.
If working full time no longer seems like something that is not possible, consider working part time for the company where you are currently employed. Many employers would be happy to not have to pay full time benefits for an employee, and this would allow some added flexibility in life. There are many other aspects that working full time offers, such as health insurance, so deciding to drop out of the full time work force is not something to decide quickly.
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Ramp Up The 401(k)
The 401(k) is one of the greatest tools in helping people towards retirement. The 401(k) allows employees to contribute pre tax dollars towards retirement savings. Many employers will offer some sort of match, like three or five percent, of the contributions. This essentially means that an employee gets a free match from their employer. There are certain tax implications if this money is taken out too soon, so be sure to keep that in mind. As a person nears retirement age, be sure to ramp up the contributions to a 401(k) even above the employer match. This is a great way to build up pre tax income and let it continue to compound.
Decrease Expenses
On the other side of the income equation in retirement is expenses. For many people, the biggest expense dealt with monthly is housing. Many people who have raised families now have a house with four or five bedrooms when only one is needed. Although having a house is an emotional attachment, be sure to look at this from a financial perspective as well. The larger the house, the bigger the mortgage and utility payments will be. Downsizing just a couple of bedrooms can save hundreds or thousands of dollars a month in expenses which can make a huge difference in retirement.
There are also many other areas that people can look towards to reduce expenses. If a person is carrying a large balance of debt, refinancing that debt when they rebuild their credit is a great way to reduce the monthly payment on the debt. There are many companies out there that can help a person repair their credit. Consider looking into some form of consolidation service that can roll all of the debts under one umbrella and make managing the finances much easier.
One expense that many people are starting to cut is cable and satellite television. Instead of paying several hundred dollars per month, a person should consider cutting the cord and using streaming services. This can save someone one or two hundred dollars per month, which can stretch the nest egg of retirement savings several more years out. It is important to remember that the lower monthly expenses are, the longer the retirement savings will last. Although it is important to go into retirement with the largest amount of savings possible, it is just as important to reduce monthly expenses as much as possible in order to make those dollars stretch farther.
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Pick Up An Extra Job You Love
With the internet revolutionizing many industries, there is a huge variety of freelance work available in many different industries now. If you enjoy freelance writing for instance, there are many companies where you can work from anywhere writing articles on certain subjects. There are also websites which a person can sell their homemade products on in order to earn an extra income.
The point here is to find something that you love that there is also a willing market for. Going into retirement, the point is not to continue to work a job you hate. Rather, find something you love and work when you want to. This will provide a measure of happiness and also allow you to earn several hundred extra dollars a month that can go into your budget. When living on a fixed income, just a couple hundred dollars in added income can go a long way in the lifestyle that a person can live.
Credit
Finally, one of the most important steps a person can go into retirement with in order to maximize retirement savings is to repair their credit. If there was a situation where a person had to take out a loan, the difference in having good credit vs. bad is vast in the monthly payment. If you are the type of person to pay every bill on time in full, there is really nothing more you can do to improve your credit score. However, if there is a history of paying late on your credit report, make a conscience effort to start to pay all the bills on time.
If there have been times in the past where these actions have hurt your credit, there are companies that can help to repair your credit. Simply working with one of these companies can end up saving someone at the retirement age thousands of dollars in reduce interest rates on future debt that is taken out. Overall, taking these steps outlined in this article will help anyone find hundreds or thousands of dollars extra per month in their retirement budget.
