We hit our fifties and suddenly the ugly idea of retirement savings pops up. It seemed so far away for so long, it’s almost implausible that retirement could be around the corner. But the fact remains, in a decade, you’re going to stop having an income. But don’t freak out just yet, there are plenty of ways to get ahead of the curve if you aren’t quite prepared yet.
Get out of Debt
Getting out of debt seems obvious, but Americans 55-64 average a $8,158 credit card balance. We all know credit card debt is the worst kind, but it can be hard to get out from under it and save for retirement at the same time, so it’s an imperative to eliminate that balance.
You probably have other debt, too. Your mortgage, for example. Most seniors have paid off their mortgage by retirement, but that number is slowly decreasing. Obviously, you don’t want much overhead when you aren’t bringing in a salary anymore, so it’s important to try to pay this off before you turn in your pink slip.
Cut an expense and use that to pay off your credit card first and foremost. At least with a mortgage, you get a tax write off, so there’s a mild upside to that debt. Mild! Afterwards, work towards adding a couple extra mortgage payments a month. You may have to cut back on entertainment or deal with the dated car you’ve been driving, but it’ll pay off in the end.
Save Your Money
There is no savings balance if you don’t save the cash, and no savings is a big problem when you retire. Statics show Americans aged 50-55 have only $8,000 in retirement savings, and that only goes up about $9,000 for 56-64 year-olds. No one’s living off $17,000 a year, so you need to get yourself together to raise savings balance. How high? Experts recommend 401(k) and IRA accounts should be 7 times your annual income at age 55. If you’re less, then start there, saving to get to that magic number.
Make a Plan
Tucking away $100 here and there isn’t a smart way to save. You need a plan. The first thing to do is figure out how old you want to be when you retire. Now, determine what you’ll need to live off each year. Assume you’ll live till 100 years-old (it happens!), and now find your difference. Your 401(k) or IRA might be flush, but you probably need to fill with more money. Figure out what you need to save each month, and do it! If it looks like you have to put away money that you really need to live on, then you should extend your retirement age by a year or two or maybe even five, depending on your situation. If this feels overwhelming, make an appointment with an advisor. Sometimes it’s good to get a second opinion.