Americans need to have more than $1 million saved in order to retire comfortably at age 65, according to many estimates. That’s a lot of money. It also underscores the need for people to begin planning for retirement as early as possible in their careers. If you’ve put off saving for your golden years, though, the good news is that it’s still possible for late starters to build a comfortable retirement fund.
American Consumer Credit Counseling, a national nonprofit, offers the following six tips for consumers who are late to the game:
1. Have a realistic target. One of the reasons consumers are unprepared for retirement is not having a realistic estimate of how much money is needed to live comfortably for that period of their lives. Having a financial target will help consumers figure out a retirement savings plan. Consumers can use this plan to figure out how much money they need to save each month to reach their desired goal.
2. Take advantage of tax breaks. Consumers can benefit from tax deferred accounts. If consumers don’t have access to a 401(k) offered by employers, they should consider opening an individual retirement account (IRA). Having these accounts will allow consumers to save the income tax on anything that they put into the account.
3. Know your limits. Each type of retirement account has different limits on how much money consumers can contribute to them per year. Consumers should know the guidelines set by the IRS to ensure that they’re taking full advantage of their plan.
4. Make catch-up contributions. Catch-up contributions allow consumers that are over 50 years old to add more than the standard contribution limit to their retirement funds, depending on the type of account that they hold. Consumers should check their eligibility for an opportunity to save additional amounts.
5. Start minimizing expenses. Consumers should start cutting costs in order to increase savings. Those extra savings can give consumers more financial freedom during their retirement. Consumers should take a look at their monthly spending and see where they can cut back.
6. Talk to a financial advisor. It might be helpful for consumers to speak to a financial advisor. Financial advisors can help late starters develop an effective retirement plan.