If you’re like many people, you established an initial retirement goal years ago, and then you became sidetracked by other, more pressing goals. Perhaps you haven’t made as much progress toward your retirement goals as you once hoped, or maybe your priorities have changed in the meantime. Some people never even set goals at all! Whatever group you fall into, you might find yourself panicking now, as retirement approaches.
You aren’t alone; many people need to play catch-up with their retirement plans. Take these three steps toward getting your plans back on track, so that you can hopefully retire when you had expected.
Step One: Examine your budget. You might be wasting a lot of money each month, but you’ll never be sure unless you examine your budget more closely. Tracking your expenses for a few months, and analyze your necessities. Put an end to any money-wasting habits once you identify them. With a clear understanding of where your money has been going, and where it needs to go instead, you can get your financial life back on the right track.
Step Two: Get out of debt. It’s difficult to get ahead when you’re paying on high-interest loans or credit cards. If you’re like most people, you spend several hundred dollars (or even more) on debt each month. Take the necessary steps to get out of debt now, and you will thank yourself in retirement.
Step Three: Increase your income. If you know that you need to get out of debt or set aside more money for retirement, adding extra income is an efficient way to meet your goals. Get a side job, start your own home-based business, or leverage your experience to ask for a raise – these are all tried-and-true methods of increasing income.
Step Four: Catch up on retirement savings. Once you’ve reduced your debt and increased your income a bit, you can divert more money to your retirement plan contributions. Make sure to take advantage of the maximum annual contribution if you can. For 2016, the contribution limit is $18,000 for qualified retirement plans like 401(k) funds. Once you reach age 50, you can make additional catch-up contributions of $6,000 per year. These extra contributions will really add up over the next decade, especially when you consider the power of compounding interest.
For more help with your retirement plan, call us to schedule an appointment. We can help you identify areas where you’re struggling, and make a plan to get caught up.
Portions of this article have been excerpted from the video “3 Ways to Catch Up If You’re Behind in Saving For Retirement” by Chris Hogan. Chris Hogan is not affiliated with LPL Financial.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.