Suddenly realize you're getting older and still haven't saved much for retirement? Don't just avoid the entire topic, knowing you won't like the answers. If you're getting a late start on saving, you need to take some drastic steps:

  • Go back to the drawing board.  You need to thoroughly analyze your situation, calculating how much you'll need for retirement, what income sources will be available, how much you currently have saved, and how much you need to save annually to reach those goals. Can't save the amount needed? Then change your retirement goals.

    Postponing retirement for a few years will give you more time to accumulate your savings and delay when withdrawals from savings begin. Or consider working after retirement on at least a part-time basis. Even a modest amount of income after retirement can substantially reduce the amount needed for retirement. 
  • Contribute the maximum to your 401(k) plan. Your contributions are deducted from your current year gross pay. If you are age 50 or older, your plan may allow additional catch-up contributions. Earnings and capital gains on investments grow tax deferred until withdrawn. If your employer matches contributions, contribute at least enough to receive the maximum matching amount.

  • Look into traditional deductible and Roth individual retirement accounts (IRA).  Even if you participate in a company-sponsored retirement plan, you can make contributions to a deductible IRA, provided your adjusted gross income does not exceed certain limits. The income limits for nondeductible Roth contributions are even higher. 

  • Use your peak earning years to substantially increase your savings.  Typically, your last years of employment are your peak earning years. Instead of increasing your lifestyle as your pay increases, save all pay raises. Consider lowering your standard of living, putting any cost reductions into savings. This can also reduce the cost of your retirement. A lower standard of living now typically means you'll be satisfied with a similar lifestyle after retirement.

  • Buy a smaller home.  Consider selling your home and moving to a smaller one, especially if you have significant equity in the home. If you've lived in your home in at least two of the last five years, you can exclude $250,000 of gain if you are a single taxpayer and $500,000 of gain if you are married filing jointly. At a minimum, this strategy will reduce your living expenses, allowing you to save more. If you have significant equity in your home, you may be able to set some of the proceeds aside in savings.

  • Restructure your debt.  Check if refinancing your mortgage will reduce your monthly mortgage payment. Find less costly options for consumer debts, including credit cards with high interest rates. Systematically pay your debts down. And the most important point - avoid incurring new debt. If you can't pay cash for something, don't purchase it.

  • Stay focused on your goals.  At this age, it's imperative to maintain your commitment to save. 

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