Retirement Saving Tips: Retirement Catch-Up
This article is used with permission from www.choosetosave.org and the American Savings Education Council.
Complete the "Ballpark E$timate" retirement planning worksheet (www.choosetosave.org/ballpark).
- Time is running out for many individuals who will soon reach retirement age.
- Unless they dramatically change their spending, saving, and investing habits—millions of people could face financial hardships in retirement.
- People are living longer today and spending more time in retirement.
- There are unexpected income changes in retirement.
- Most retirees will have to live on a fixed income consisting mainly of Social Security benefits and a pension check. No longer will there be annual raises, bonuses, or overtime pay.
- Prepare for higher health care costs, including out-of-pocket expenses for prescriptions and doctor appointments.
- Add extra money in your retirement budget to pay for federal and state income taxes, just in case you don't withhold any money from your pension or Social Security checks.
- Find out how much your Social Security benefit will be.
- Develop a retirement financial plan that lists all your expected monthly income and monthly expenses.
- Consider consolidating your individual retirement accounts (IRAs).
- Max out on all of your eligible tax-deferred retirement savings (e.g., 401[k] plan, IRAs).
- Try to pay off your mortgage so you'll own your home when you retire.
- Take stock of your current income and resources.
- Readjust your spending habits so you have more in savings (e.g., give up some luxuries like going out to dinner or buying a cappuccino every day, etc.).
- Read all the statements you receive from your pension fund, 401(k), or IRA to catch mistakes before it's too late.
- Get help from a financial expert or consider enrolling in a money management class (e.g., learn how to invest, etc.).
- Depending on your financial situation, you may have to delay your retirement or take on part-time work for additional spending money.
- Find out about your Social Security benefits. Call the Social Security Administration at (800) 772-1213 for a free Social Security statement or visit http://www.ssa.gov.
- Learn about your employer's pension or savings plan. If your employer offers a plan, check to see what your benefit is worth. Most employers will provide an individual benefit statement if you request one.
- Find out what will happen to your pension before you change jobs. Learn what benefits you may have from previous employment and find out if you will be entitled to benefits from your spouse's plan. If you do change jobs, do not take a lump sum distribution; either move the money to a rollover IRA or to a new employer's plan.
- Ask about the Roth 401(k) if you would prefer to pay taxes now and not have to ever worry about them in the future.
- Put money into an IRA.
- Don't dip into your retirement savings. You'll lose principal and interest and you may lose tax benefits. If you change jobs, roll over your savings directly into an IRA or your new employer's retirement plan.
The Retirement Catch-Up Guide by Ellen Hoffman (http://www.retirementcatchup.com)
Choose to Save& The American Savings Education Council. (n.d.). Retirement saving tips. Retrieved November 8, 2016, from http://www.choosetosave.org