The best way to prepare for retirement is with a well-executed long-term plan. Then there's reality, at least for most people. Whether the cause is a layoff, a divorce, an untimely death or unfortunate disability, numerous unpredictable and unstoppable obstacles can derail our best intentions. As a result, many folks find themselves in the twilight of their working years having saved far less for retirement than they had anticipated.
Fear not, as there are still some key retirement planning strategies that can allow you to salvage your later years. Sure, you may not get that around-the-word vacation, but then again, do you really like standing in airport security lines? Here are important considerations for those finding themselves thrust into last minute retirement planning:
Save Like Crazy
If you're in your fifties or sixties, you don't have the time to receive the maximum benefit from the miracle of compounding interest. Still, every dollar you save today will have the opportunity to grow significantly by the time you access the funds during retirement. Fortunately, the government provides a few catch-up provisions for last minute savers:
- Those saving in a regular IRA or a Roth IRA who are 50 or older may save an extra $1,000 each year for a total of $6,000 annually.
- Those aged 50 or older saving in a 401(k) plan can save an extra $5,000 compared to their younger co-workers. The maximum allowable contribution for 2008 into a 401(k) plan for someone 50 or older is $20,500.
Both IRAs and 401(k) plans provide for tax-deferred growth, while a Roth IRA features tax-free growth. Any of those options are particularly attractive when it comes to last minute retirement saving.
Of course, the higher savings limits are only of passing interest if you are unable to actually save more and thereby put more money into the plans. To truly make a difference to your retirement at this stage likely means changing habits. Although not easily done at this point, making changes is a necessary step for anyone with aspirations of permanently hanging up their work clothes one day. Whether by cutting back on the mundane lunch expenses via brown-bagging or by skipping a second vacation (or by making one shorter or closer to home), lowering your spending is the only guaranteed way to increase your savings rate.
Consider a Delay
Another option may be to delay your retirement date. Every year you work helps your retirement planning twice. First, because the delay means there's another year you're working and can save for retirement. The second benefit comes from the fact that you are not withdrawing your assets for an additional twelve months. This delay means you're not only using less of your cash, but you're also allowing your existing nest egg more time to grow.
The past is the past. What you control now is your behavior the rest of the way. If you're still working, you can still save. If you can save, you can still make a big impact on your retirement. There will never a better day to get started than today.
