What to do if you haven’t saved enough for retirement
Not everyone facing a retirement deficit can throw extra money into a 401(k) or IRA. Many people are lucky if they have saved money.
How bad is that for the country’s elderly? A recent survey by Sagewell Financial revealed that 27% of people between the ages of 55 and 67 have less than $10,000 saved for retirement. Forty percent have less than $50,000.
“For these people, all is not lost,” said Jerry Patterson, president of Fidelity Investments Life Insurance. “Retirement life is going to require a lot of focus on budgeting and managing cash flow versus income and savings.”
Knowing that you’re short on retirement money is sure to evoke feelings of dread. After all, retirement can easily last more than 20 years, and $10,000 won’t get you far. But that doesn’t have to keep you up at night. There are moves you can make now to settle in later, and it all starts with creating a plan.
If you’re in your 50s and working, now is the time to figure out exactly how much you’ll need in retirement. This means creating a detailed budget that includes all of the essential and discretionary expenses you plan to have as you age. Consider when and where you want to retire. From there, think about how much income you will be living off if there are no savings to speak of. Also identify areas in which to cut costs, with the aim of keeping your monthly expenses as low as possible. If you need help budgeting, the AARP Retirement Calculator can help. After answering a series of questions, the calculator will help you determine how much you need to save.
Once you have an idea of how much you’ll need, you can identify ways to shore up your money. This could mean working overtime, getting a second part-time job, or considering a career change for better pay. “Now is when you want to maximize your income,” says Jody D’agostini, Certified Financial Planner and Retirement Specialist at Equitable Advisors. “There are over 11 million open jobs right now. It may be time to explore a career change. The higher your salary, the more money you can save.
For people in their mid to late 60s who are considering retiring without savings, delaying that next chapter may make more sense. Working another year or two, health permitting, will give you more time to collect a salary and improve your financial situation. At this point, you should focus on paying off your high-interest debt and building an emergency fund to cover three to six months of expenses. After that, you can take care of saving for your retirement. Don’t know where to start? AARP’s Ace Your Retirement and Money Map digital tools can help you create a plan.
During this time, try to delay collecting Social Security benefits. The longer you wait, the larger your payment. “The goal is to delay as long as possible,” says D’agostini. “Those who delay get a credit of 8% per year until age 70.”