It takes a while for some people to figure out what they want their career to look like, and even longer to make that dream a reality. If you got off to a slow start in saving for your retirement, there are some measures you must take in order to ensure you have to make that retirement happen.
Here are 10 ways in which you can play catch up if you started saving later in life.
There are plenty of creative ways to make some extra dough on the side. For example, if you own a house and you have an extra room, consider renting it out through Airbnb. You could also sell items in your tool shed you no longer need, or perhaps downsize to a smaller home. It’s also worth considering moving to a state where the cost of living is lower, especially if you’re working from home and making a decent living.
Limit your spending
You’ll need to follow a more frugal lifestyle if you don’t begin saving for retirement until you’re 40, or maybe even 50. Get an affordable car that does the job and skip that $5 Starbucks latte. Budgeting is of the essence at this juncture in your life, so you must pare down your spending to the essentials.
Consider working more than 40 hours a week
Depending on your financial situation, you may need to consider getting a side job. A 12-hour weekend job that pays $15 an hour could go a long way, netting you more than $9,000 a year on top of what you get from your full-time job.
Get rid of consumer debt
Don’t let credit card bills pile up. The rising interest on these bills will eat through your retirement savings. Pay off your card with the highest interest balance, and go from there. It takes a lot of discipline to cut down on your spending, but your retirement fund will thank you.
Become better at saving when you get that raise
As you progress in your career and start earning more, avoid the temptation to up your spending. Instead, use the extra funds to pay off debt and add to your retirement fund. Remember, there’s a price you pay as you move up in the world as you’ll be in a higher tax bracket, so spend accordingly.
Avoid risky investing opportunities
Thinking of going for risky investment ventures with higher returns to help you catch up on retirement investing? That’s a bad idea. There are plenty of investment scams and speculative stocks that promise “high returns with little to no risk,” and these should be avoided.
Get the right retirement plan
When you start saving later in life, make sure you max out your 401(k) in order to get the highest returns of your retirement fund, tax free. Beyond this plan, consider opening a Roth IRA, which allows you to save up and withdraw money tax free once retirement kicks in. This plan will even help you avoid capital gains tax.
Contribute more to your IRA tax-free after age 50
Once you hit age 50, you can actually save more in your retirement account, tax free. Catch-up contributions can reach $6,000 a year in addition to the $18,000 you can inject to your IRA, amounting to $24,000 in savings you can amass free of tax. You can read more about the subject in the IRS rules for 403b contribution limits.
You might have to retire later Many wish to retire by age 65, but you may have to retire a few years later. Attaining a $1 million goal for retirement is easier to do with a job on the side and a few more years in the workforce. If you can retire earlier, great. If not, be flexible.
Choose the right place to retire
Realize that retiring in your dream city might not be possible. There are plenty of places in the U.S. where you can retire comfortably with your Social Security funds alone. Also, consider moving to another country for retirement that will give you the most bang for your buck.