Frontier knows that most of us are guilty of procrastination in at least one area of our lives. For example, maybe you keep putting off going to the doctor for that annual physical, or sitting down with your spouse and balancing your checkbook.
According to a new report released by the World Economic Forum, many people have procrastinated when it comes to saving for their retirement. In fact, the report forecasts a $400 trillion retirement savings shortfall worldwide by the year 2050 if current retirement savings trends continue.
According to the National Institute on Retirement Security, Americans between the ages of 55 and 64 who have a retirement account have saved approximately $104,000 for retirement. While this might initially sound like a lot of money, in reality it probably won’t go very far in funding a financially secure retirement.
If you’ve gotten a late start in saving for retirement, remember this ancient Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is now.”
In other words, there’s nothing you can do now to make up for past years when you didn’t save adequately for retirement. But the one thing that you can do now is not waste any more time. Even if you’re in your 40s, 50s or 60s, there are steps you can take right now to try to get your retirement savings plan back on track.
Make Catch-up Contributions
In Frontier’s opinion, the first thing to do is take advantage of special elective deferral “catch-up” contributions that are permitted under certain types of retirement plans. If you’re 50 years of age or over, you can make the following catch-up contributions:
- Traditional 401(k), 403(b) and 457 plans — You can contribute an additional $6,000 per year for a total annual contribution of $24,000 in 2017.
- SIMPLE 401(k) plan and SIMPLE IRA — You can contribute an additional $3,000 per year for a total annual contribution of $15,500 in 2017.
- Traditional and Roth IRAs — You can contribute an additional $1,000 per year for a total annual contribution of $6,500 in 2017.
Of course, you’ll need to generate these extra savings from somewhere. For most people, generating extra retirement savings requires making some changes to the family budget. This, in turn, may require adjusting some of your spending habits and decisions, which could affect your lifestyle.
We have come up with a few possible ways to get started:
- Pare back on entertainment. This includes everything from eating out and going to the movies to attending concerts and sporting events and going on expensive vacations. Just remember: Every dollar you redirect from entertainment to your retirement account is one more dollar that could be available to help you live a more comfortable retirement lifestyle down the road.
- Scrutinize your monthly bills. Many people are shocked when they realize how much money they’re paying each month for premium cable TV packages, cell phone and data plans, and various club memberships. These “little” extra expenses can easily add up to hundreds of dollars a month that could be redirected to your retirement plan.
- Reallocate some of your college savings. Sure, saving for your children’s college educations is an important financial goal. However, many financial experts encourage families to prioritize retirement savings ahead of college savings. After all, you may be able to tap other sources of income to help pay for college, such as low-interest loans, scholarships and grants.
Procrastinate No Longer
If you’ve procrastinated when it comes to saving for retirement, don’t despair — it might still not be too late to reach your retirement savings goals. We believe that the sooner you get started, the more time you’ll have to benefit from the effects of compounding to potentially grow your retirement nest egg.
Please contact us if you have more questions about getting caught up on your retirement savings.