As the baby boomer generation begins to retire, a troubling trend has started to emerge. A frightening percentage of newly retired baby boomers may not have the savings they need to see them through their golden years, and that could create a crisis for everyone.
Whether you are a baby boomer on the cusp of retirement, a recent college graduate working at your first real job, or somewhere in between on the planning spectrum, the time to catch up is now. Being behind in your retirement savings is not fun, but you do not have to resign yourself to decades of post-work poverty. Here are five strategies you can use to catch up and jump-start your retirement nest egg.
Strategy #1 - Make the Most of Your 401(k)
The simplest, easiest, and most effective way to jump-start your stalled retirement savings is with an employer-based plan. Contributing to a 401(k), 403(b) or other workplace retirement plan will reduce your taxes now will give you the funds you need in the future.
Boosting your 401(k) contribution could not be easier - you can literally do it online or fill out an easy form. You can even sign up for an automatic escalation model that increases your contributions every year, so you can max out the 401(k) and jump-start your retirement savings.
Strategy #2 - Reduce Your Future Taxes with a Roth IRA
If you are looking for one retirement account that will make the most of your current savings, it is hard to beat the Roth IRA. While the money you put into a Roth IRA is not deductible today, the accumulated wealth will be tax-free tomorrow.
You should strongly consider a Roth IRA if you are behind in your retirement savings, and prioritizing this tax-free account could be a very smart thing to do. You can maximize your savings even more if you are 50 years of age or older - catch-up contributions make the Roth IRA an even more attractive investment vehicle.
Strategy #3 - Bank Your Bonuses
The next time you get a raise, bank that money instead of spending it. The same is true of year-end bonuses, incentive payments, and any other form of extra cash.
If you bank your bonuses you might be able to max out your 401(k) at work or fund those catch-up contributions on that Roth IRA. Banking your bonuses instead of spending them will also provide you with the fiscal discipline you will need in retirement, so the funds you save now can help you enjoy a brighter and more financially secure tomorrow.
Strategy #4 - Catch Up with a Side Hustle
It has never been easier to earn extra money, and there are plenty of great side hustles to be had. If you want to boost your retirement savings and make up for lost time, taking on a side hustle is a great place to start.
Taking on a side hustle has a number of important benefits, and earning extra money is only the start. You will, of course, earn extra cash, and you can use that money to max out your retirement plans and make those catch-up contributions. But if your side hustle brings in significant money, you can also contribute to retirement plans targeting the self-employed, giving you an even bigger bang for your retirement buck.
Strategy #5 - Squeeze Your Budget for a Few Years
If you are behind in your retirement savings, tightening your belt now could give you more to spend later. Squeezing the fat out of your budget will give you more money to invest, and the longer you let it there the larger it can grow.
There are many ways to squeeze more cash out of your budget, some more painful than others. If you need a simple place to start, cooking at home an additional day a week or switching to generic products at the grocery store might be relatively painless. If you need more cash you can move on to more significant changes, like becoming a one-car family or joining the carpool at work.
A significant portion of retirement savers could experience a shortfall in their income, and a lack of planning may create a crisis for individuals and society as a whole. That is the bad news, but the good news is there is still time to turn things around. The five strategies listed above can help you make up for lost time while making the most of the time you still have left.
