Though retirement might seem like a relaxing, laid-back period of life, the reality is that it can be extremely stressful, especially from a financial perspective. But while some of that boils down to senior living costs coming in higher than expected, it’s also a matter of insufficient planning — and saving.
Older Americans are especially guilty of the latter, and a new survey from investment firm Franklin Templeton further drives home this point. An alarming 66% of pre-retirees admit they’re behind on savings, even though setting funds aside for the future is supposedly a top goal for many older workers. Throw in the fact that 46% of current retirees say they should’ve saved more, and it’s no wonder so many seniors wind up overwhelmingly stressed during their golden years.
If you’re nearing retirement with an inadequate amount of savings to your name, there aresteps you can take to catch up or compensate. Here are a few to start with.
1. Work longer
If you’re behind on retirement savings, one of the most efficient fixes for that problem is to extend your career. Doing so will serve a number of purposes. First, the longer you work, the longer you’ll avoid tapping your existing savings, thereby helping that money last longer. Next, working a few extra years will give you an added opportunity to save more money, especially if you’re able to ramp up your retirement plan contributions. Workers 50 and over can currently set aside up to $7,000 a year in an IRA, or $25,000 a year in a 401(k). Swing the latter for three years, and you’ll be sitting on an extra $75,000 for retirement purposes (or more, when you factor in some modest investment gains).
Finally, working longer might also help you boost your Social Security benefits. If you’re able to delay benefits past your full retirement age (either 66, 67, or somewhere in between, depending on the year you were born), you’ll boost them by 8% a year up until age 70. Not only that, but those benefits are calculated based on your 35 highest-paid working years. If your income is greater now than it was years ago, working longer will allow you to replace some lower-earning years in that formula with higher numbers, thereby bringing your benefits up.
2. Get a second job
When you work full-time, chances are the last thing you want to do with your spare time is work some more. But if you’re low on retirement savings with a limited catch-up window, getting a side hustle is a reasonable solution, and if you go that route, you’ll be in good company. Of the 44 million Americans who work a second gig, 14% do so for the express purpose of funding a retirement plan. Furthermore, that side job doesn’t have to be something you hate. You can try monetizing a hobby you already spend time on (think crafting, baking, or photography), or dabble in something new that you’ve always wanted to try.
Another great thing about getting a second job later in life? You’ll have the option to carry it with you into retirement if you need a means of supplementing your income.
3. Adjust your expectations
Maybe your dream retirement involves holding onto your large but costly-to-maintain house, traveling a lot, and dining out often. There’s nothing wrong with that vision if your savings can support it, but if they can’t, then you may need to rethink what retirement will look like for you. Downsizing to a smaller, less expensive home, for example, is a good way to stretch your savings when they’re limited. The same holds true for mostly dining at home instead of at restaurants, and focusing less on travel and more on free entertainment.
This isn’t to say that you won’t experience some element of disappointment in having to change up your vision. But if your savings really can’t suffice in paying for your dream retirement, then you may have no choice but to come up with a backup plan.
Approaching retirement with limited savings is an uncomfortable position to be in, to say the least. But if that’s your reality, take steps to catch up and also work around it. Otherwise, you may find that retirement is nothing more than a prolonged period of stress.
