What happens when you wake up one morning and realize that you are not where you want to be in terms of retirement? That's a situation many people find themselves in.
Your best bet is saving early and often. But if you are nearing your desired retirement age, you might need to move into retirement mode if you haven't been saving for as long as you would like. If you find yourself in need of last-minute retirement planning, here are some tips to help you make the best of the current situation:
1. Maximize your employer match. If your company offers a match, you should check to make sure you are maximizing it. It's free money for you. If you aren't getting the maximum match, you should do what it takes to get that match.
In fact, this late in the game, you need to boost your retirement account contributions as much as you can afford to. If you already have maxed out a 401(k), open an IRA (traditional or Roth) so you can make additional tax-advantaged contributions.
2. Catch-up contributions. If you are over age 50, you have the chance to make catch-up contributions. If you have reached the point where you are maxing out your retirement accounts (and hopefully you are to that point at this juncture), and you are eligible, it's time to put in some catch-up contributions in order to help the cause.
3. Look into index funds or ETFs. Even this late in the game, you might be able to benefit from the right asset allocation. Index funds and index ETFs offer a degree of diversity, are low cost, and can provide you with a decent amount of growth. Additionally, dividend stocks can provide you with a way to ramp up your portfolio. A dividend reinvestment plan can provide automatic reinvestment to compound your gains.
It's a good idea to consult a knowledgeable financial professional about your risk tolerance before making this decision. Getting an unbiased view of what investments might be appropriate for your situation will help your efforts to retire in your desired time frame.
4. Consider working longer. For some would-be retirees, a longer career is a necessity. If you've started saving too late, you might need a few extra years to build your nest egg a little bit. This doesn't mean that you have to work full time. You might be able to manage working part time, or on a freelance or consulting basis. Even a home-based business might be an option. Look at the alternatives, and determine how you might put off living only on your nest egg for a little bit longer.
5. Downsize your lifestyle. Another reality is that you might need to downsize your lifestyle if your nest egg is insufficient for your current needs. In some cases, if you don't want to work a little bit longer, you might need to re-evaluate your expenses. Selling some items, selling your home and moving into a smaller place, and perhaps adjusting your view of retirement might be necessary if your nest egg isn't keeping pace.
Jeff Rose is a certified financial planner and U.S. combat veteran. He blogs at Good Financial Cents and Soldier of Finance.
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