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Last-Minute Ways to Improve Your Retirement Finances

It's difficult to make up for a lack of savings once you are in your 50s or 60s, but there are a few ways to do it. Significantly downsizing your home can give your nest egg a quick and significant boost, and taking steps to maximize Social Security can improve your monthly cash flow. Of course, you could always work longer and shovel as much money into retirement accounts as you can. Here's how to fix your retirement finances after age 50.

Start super-saving. If you didn't save earlier in your career, it's a good idea to do some serious saving in your 50s and 60s. Workers age 50 and older can defer paying income tax on as much as $24,000 in a 401(k) and $6,500 in an individual retirement account, $7,000 more than younger workers are eligible to contribute to these retirement accounts. If you made a commitment to max out both types of retirement accounts each year between ages 50 and 65, which means saving $30,500 per year, and earn 7 percent annual returns, you will accumulate $625,728 after saving for 15 years. But saving that much requires either a significant income or some sacrifices in other areas of your life. "It's not ideal, because $30,500 for a normal working family is a pretty big chunk of money," says Cathy Pareto, a certified financial planner and president of Cathy Pareto and Associates in Coral Gables, Florida. "You can do it, but you have to be disciplined, dedicated and willing, if you have to, to cut expenses from your budget."

Tap your home. The equity you have built up in your home can be used to fund retirement if you are willing to move into less-expensive housing or to a more affordable area of the country. "People are selling their homes and moving to lower-cost areas and using the income to help finance their retirement," says Michael Stoll, a professor of public policy and urban planning at the University of California--Los Angeles. This strategy works particularly well if you live in a high-cost city, such as New York, San Francisco or Miami, and are willing to move to a city where housing costs half as much or less. "If you have not saved enough money for retirement, think about leaving the city that you live in and moving to someplace that is more affordable," Pareto says. "Take whatever equity you may have built in your home, and you can convert it into savings by downsizing or moving entirely to a new area with a cheaper cost of living." If you aren't willing to leave your current city behind, you may still be able to improve your finances by downsizing into a smaller house or relocating to a less-expensive part of town.

Maximize Social Security. The age you sign up for Social Security plays a big role in how much your monthly payments will be. Payouts are reduced if you sign up before your full retirement age, which is typically 66 or 67, depending on your birth year. Monthly payments also increase for each additional year of delayed claiming up until age 70. "If you could avoid signing up until full retirement age, you get a bigger benefit that is indexed for inflation," says Thomas Fisher, a certified financial planner for Fisher Financial Strategies in Cambridge, Massachusetts. "The longer you can push it out until you get to age 70, the more you gain."

Consider working longer. Working a few extra years gives you more time to save and shortens the period of retirement you need to pay for. "One of the simplest ways to improve your prospects for not running out of money in retirement is to try to find a way to push your retirement out," Fisher says. But you don't necessarily need to stick with a full-time job you hate to improve your finances. Even a part-time or seasonal job can help if it allows you to cover some of your current bills and gives your savings more time to grow. "You might be able to do consulting work when you leave your employer or work part time for a while," Fisher says. "Position yourself for a slow move into retirement."

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