Do you find yourself behind the eight ball when reviewing your retirement plan? Have you been living paycheck to paycheck, raising a family, paying off student loans or working to get a business off the ground? The first thing you need to know is that you are not alone! A Washington, D.C.-based study found that the median balance of IRAs for people in their early 50s is about $32,000 and $41,000 for people in their late 50s. Well, don’t despair! It’s never too late to get started so let’s review some options to help get you on your way!
Eliminate Consumer Debt
Consumer debt is quite expensive so start paying it off as quickly as possible. This includes credit card balances, car loans and other high-interest debt. Pay down the highest interest rate balances first, and as each one is paid off, move on to the next. Always make purchases with cash and do not accumulate more debt. Once consumer debt is taken care of, determine if a larger percentage of your mortgage payments is being applied towards interest. If so it would be beneficial to make extra mortgage payments, otherwise, it may make more sense to use that money for investment purposes.
Start by breaking down your expenses into needs, wants and savings. Your needs are basic expenses like housing, food and utilities. Wants are nice-to-have items like travel, entertainment and clothing and should be the first expenses to scrutinize.
Perhaps you could move into cheaper rental accommodations or downsize your home to a condo or smaller residence. Consider looking for employment in another state that offers a lower cost of living. Instead of an overseas vacation, travel closer to home and deposit the savings towards your retirement plan. Replace your daily latte with a regular coffee or better still, grind your own beans! Cutting back on small daily expenses can make a big difference in your retirement savings plan over the long term so examine these carefully.
You and Your Spouse Come First
Most financial experts agree that saving for retirement is a higher priority than saving for your children’s college. Kids have many options to attend college, including part-time jobs, grants and student loans, while retirement loans are not as easy to come by. Adult children can depend on themselves financially and have more time on their side, much more than you do!
Re-Assess Your Portfolio
The closer you get to retirement, the less risk you want to take, however, you don’t want to eliminate the possibility of earning higher returns on some of your investments. If you have a retirement plan outside of your workplace plan, you have the advantage of customizing and diversifying your portfolio. Review your asset allocation to ensure it includes a mixture of bonds, stocks and other investments and be sure you are not paying unnecessary fees, commissions and other administrative costs.
Earn Extra Income
Do you have the time and energy to earn extra income in a second job? Perhaps it’s time to ask for a raise at work or look for a better job with more pay or one that offers better pension and retirement options. Do you have a room or suite in your home you can rent out? Once you retire, you could work part-time, offer your skills in a consulting role or teach at a local college.
Saving for retirement late in your years is challenging, but it’s never too late to begin as long as you start now! Consult with a financial advisor for guidance and advice to come up with a strategy and be sure to stick to it.
Jeremy Wallace is founder and chief investment officer at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Jeremy has 20 years of experience in the financial industry and is passionate about helping clients preserve and enhance their wealth so they can pursue their passions. Jeremy graduated from Emory University with a degree in international economics and a certificate in financial planning. Outside of the office, Jeremy spends most of his free time with his wife, Julie, and their three children, Isabel, Lincoln, and Reid. He is an avid Chicago Cubs baseball fan, and he enjoys golfing with his wife and traveling with his family. Learn more about Jeremy by connecting with him on LinkedIn.