Starting Late on Saving For Retirement? Take Five Steps Forward.

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If you’re in your 50s or 60s and feeling you’re behind in saving for your retirement, or you haven’t saved anything at all, you are not alone. Rising costs in every day living expenses, unforeseen expenses, credit card and other debt, and in some cases, just a lack of sound financial planning, leave many people feeling like they may never catch up.

Whatever the reason, don’t give up hope. In fact, here are five steps you can take today to bring you closer to living a comfortable life in retirement:

1. Take a Good, Hard Look at Your Expenses, Cut Where You Can

Many folks get off track simply because their monthly expenses exceed their income or leave them too little money to adequately fund their retirement. While it may be painful to cut back on expenses, which often means a change in lifestyle, this is the most important step you can take today to get back on track. Remember: Don’t let the chance to save get away from you.

Start by making a list of all your monthly expenses, and then annualize all of your expenses and put them in percentage terms compared to your entire after-tax income. For instance, if your after-tax family income is $50,000 and you spend $150 a month on cable TV, that means $1,800 a year, or nearly 4% of your entire income, is going to the cable company. Looking at your expenses this way will help you more easily make decisions on where to cut. Consider family cell phone plans, utility bills, automobile and food bills as potential places to trim the fat. Eliminating even a few hundred dollars each month from your expenses potentially translates to a few thousand extra retirement dollars every year. That might not seem like much, but every dollar counts. Those who cut back while still working generally become accustomed to living on less. By “right-sizing” your life and lifestyle now, you’ll end up using less of your funds each year once you retire.

2. Downsize Your Home Now or Share Living Expenses

Many people in their 50s and 60s are “empty nesters,” with kids in or through college and often more room than they actually need. If you find yourself in this situation and a large chunk of your mortgage is paid, your home can become a source of significant income. One simple option is to downsize. Moving from a three- or four-bedroom home to a two-bedroom condo could provide upwards of $100,000 that could be put into an investment fund. Investment returns may track or even outpace housing prices over the next decade. Many people have seen their property values rapidly deteriorate over the past six to eight years and worry that they will give up potential unrealized gains. But it’s important to remember that getting a lower selling price on your home also means that purchasing a new property will be less expensive. If you are underwater on your home—owing more on it that its market value—and hesitant to sell, another option is to share housing expenses with extended family members or close friends.

3. Consider a Second Job or Working During Retirement to Offset Expenses

As painful as it might be, a second job is a good way to instantly boost the amount of money you are putting toward retirement. Even a part-time job that pays a few thousand dollars a year may help Again, every bit counts.

Most retirees are happy to be freed from the daily grind, but many also find that they need things to keep them occupied. If you started saving late, one thing to do is figure out how you can create extra income in retirement by doing something you enjoy. There are many opportunities. A retiree with a broad range of experience could be an excellent substitute teacher. Avid gardeners could expand their plot and sell their produce at a local farmer’s market. Another option is to ask your employer if you can stay on as a part-time advisor during retirement. Employers value the experience of their most senior employees and will often jump at the opportunity to keep them on the payroll in an advisory role.

Working during retirement or retiring later will also allow your assets to grow longer, increase your eventual social security payments and shorten the time your retirement funds will need to last.

4. Make Sure You Take Steps to Protect What You Have

Life insurance and long-term care insurance might seem like extra or even potentially unaffordable expenses, but failing to purchase these policies can easily cause a retirement shortfall. An unexpected illness or death can destroy even the best retirement savings plan. Nursing homes can run thousands of dollars a month and some illnesses can result in costs into the hundreds of thousands. If you are saving late, it is vitally important that you examine these options so an unforeseen circumstance doesn’t drain the funds you have.

5. Consider Retiring Later

According to the Society of Actuaries, a 65-year-old man in 2000 has a 50% chance of reaching age 85; for a woman, it’s 88. Considering the rapid pace of medical advances, those that started saving late will likely need to retire later. It is a harsh realization for most, but it is always better to understand early that you need to work longer to meet your retirement floor than it is to run out of funds later in life when working is no longer an option. Instead of retiring, you might decide to apply the knowledge you’ve gained in a more senior position. If you were a nurse for 30 years, for instance, you could make a valuable contribution in hospital administration. Or a salesman might try his hand at consulting.

Finally, to ensure you get on track and stay on track with you retirement plan, seek the advice of a low-cost financial advisor who can provide objective, personalized, objective and unbiased advice.

The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.

Please note that investing involves risk, and past performance is not indicative of future results

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© 2014 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017