Are you feeling a little (or a lot) behind when it comes to saving for retirement? Don’t give up. Here are a few tips to help you focus your efforts and maximize the money you have available to save.
Step 1: Reduce Expenses
The lower your monthly expenses, the less money you need to retire. Where can you cut back? Could you possibly downsize your home and cash out some equity for retirement?
Also try to pinpoint areas where you might be spending mindlessly and could cut costs quickly. Maybe you could go out to lunch less often during the work week and host friends in your home instead of grabbing dinner or brunch at a restaurant. Canceling underused gym memberships and media subscriptions helps, too.
Step 2: Pay Down Debt
Focusing on paying down debt is one of the most effective ways to reduce your long-term expenses. When you get rid of debt, you stop losing money to interest and increase your monthly cash flow. As you tackle each remaining balance, redirect the money you were putting toward that payment to saving more for retirement.
Step 3: Make Catch-Up Contributions
The annual contribution limit for 401(k) and 403(b) plans in 2018 is $18,500, but if you’re 50 or older at the end of the calendar year, you can contribute an additional $6,000 for a total of $24,500. For traditional and Roth IRAs, the contribution limit is $5,500, but you can make an additional $1,000 in catch-up contributions.
Do your best to maximize your contributions to these accounts; their tax advantages will help your money grow faster, especially if you invest in something age-appropriate such as a target date retirement fund. Working past 65 can help you pad your nest egg, too.