Need to get your retirement savings back on track? Start with these 10 retirement savings tips.
March 12, 2021
In a perfect world, you’ve been saving a large portion of your salary every year in a retirement account. That money has been earning interest (and that interest has been earning interest), and you’ll be able to retire comfortably, maybe even early. Oh, retirement bliss…
The reality of retirement, however, is not always so rosy. In fact, 52 percent of American workers reported that they were behind on their retirement savings goals, according to a poll conducted by Bankrate.
If you’re like the people surveyed, the question on your mind might be, “How do I catch up on my retirement savings?” No matter how close you are to retirement or how little you have saved up, it’s never too late to consider new tactics to get your nest egg growing. Social Security and Medicare may not be enough to cover your retirement expenses, so the best ways to catch up on retirement savings will include smart retirement savings strategies and financial tactics.
Why do we fall behind in retirement planning?
When you’re thinking about how to catch up on retirement savings, it’s important to understand common retirement savings mistakes that can sideline your goals. This will allow you to develop effective retirement savings strategies to get back on track.
One of the most essential retirement savings tips is to avoid making early withdrawals on your retirement accounts. In that same Bankrate poll, nearly half, or 49 percent, of people with retirement accounts withdrew money before eligible retirement age.
While an early withdrawal may not seem like a big deal in the moment, especially if you have another need for those funds, it can actually have a significant long-term impact on your retirement savings. You could face early withdrawal penalties or fees, for example, which will reduce your current savings and your total savings in the future.
Be sure to consult with a tax advisor or your bank to determine the eligible age of withdrawal for your specific accounts.
It can be easy to divert the money you should be saving for retirement to other financial goals. Whether you become unemployed and need to pay the bills, or an unexpected expense arises and you have no emergency fund set aside for the purpose, life can get in the way. The good news is that you can learn how to catch up on retirement savings by following a few key strategies and tactics.
Consider these tips for saving for retirement to reach your retirement goal on your time frame:
Retirement savings strategies
1. Say goodbye to high-interest debt
One of the best ways to catch up on retirement savings is to pay off any high-interest debt as quickly as you can. Instead of spending on interest charges, you can divert those funds to your retirement savings. Thanks to compound interest, these new funds you are able to allocate to retirement will earn interest of their own, and that interest will start to earn interest. Pretty exciting, right?
Take stock of your existing debt, whether it’s from credit cards or loans, and update your budget with the goal of paying off your debt as soon as possible. You can consider starting with the debt that has the highest interest rate first, and gradually move on to debt with lower rates.
Source: discover.com