Ideas to Catch Up Saving for Retirement, Ep #124

Do you feel like you’re late to the game? Are you in your 50s and just now seriously looking at what you have saved for retirement? If you feel like you don’t have any hope of reaching the retirement of your dreams, I’m here to tell you that you still can. But it will take some sacrifice. So how do you get caught up saving for retirement? I share some ideas in this episode of the Retirement Made Easy podcast.

You will want to hear this episode if you are interested in…

• [3:42] What to do if you’re behind on saving for retirement
• [6:38] The question you need to ask yourself
• [8:36] The best 401k match I’ve ever seen
• [9:28] A few strategies to save more money
• [11:43] Start with the end goals in mind
• [16:30] What got you here won’t get you there

Make sure you’re focused on numbers that matter

I spoke with someone who was 55 and wanted to retire at age 65—but only had $100,000 saved. He thought he could save some money by looking for lower-cost mutual funds. Instead of focusing on the cost of the funds (that usually make very little impact), he needed to focus on the amount he was contributing to his 401k.

Based on what he wanted out of retirement, he needed to have $1.4 million saved by the time he turned 65. At the time we spoke, he was only saving 4% of his annual income, with his company matching 50% of that (for a grand total of 6% of his annual salary).

He was never going to hit his goal by contributing 6% per year. He’d need a 16% annualized compounded return to reach his goals. That’s a steep—nearly impossible—return.

He knew where he needed to be in 10 years. So the bottom line? He needed to adjust his behavior to meet that goal.

What do I need to do differently?

You must always ask: “What do I need to do differently?” The answer isn’t lower-cost investments. It’s changing your priorities. You should be saving 15% of your annual household income for retirement. If you’re 55 and you haven’t been doing this, you may need to save closer to 20% or 25% to get back on track. Once you’re back on track, you can bump the number back down to 15%.

Strategies to save more for retirement

An even better recommendation? You could work for another company with a better 401k match. This particular man decided to make a career change. He ended up working for a utility company that matched 9% of his salary being contributed to his 401k. A better 401k match can make all the difference. I had one client that retired from Microsoft. They matched—dollar-for-dollar—up to the annual 401k contribution limit ($27,000 if you’re over 50).

What else could you do? The average car payment in the US is $667 per month. If you’re behind on saving for retirement, why not pay off your car, take the car payment, and put that toward your retirement?

Work backward from your goals (and crunch some numbers)

If you feel like you’re behind, decide when you want to retire, what your goals are, and what it’s going to take to get there. Then, we can run different scenarios based on a 4% return, 6% return, 8% return, etc. Unless you’re investing your money in a CD or annuity with a guaranteed interest rate, you don’t know what your return will be. We have to use assumptions.

You’ve worked your entire life to live a dream retirement. You need to make it count. If you need help getting on track, don’t hesitate to reach out. I’d love to help you reach the retirement of your dreams.

Resources & People Mentioned

• 3 Steps to Retirement Planning