Catching Up On Retirement Savings Before It's Too Late

Barbara Marquand | guest writer for GoTalkMoney

Boosting Your Retirement Savings Rate: Playing Catch Up After Age 50

If you're over 50 and don't think you've saved enough for retirement you're not alone. Almost half of Americans 55 and older report total retirement savings and investments of under $50,000, according to the Employee Benefit Research Institute's 2009 Retirement Confidence Survey.

There's no need to panic, but the sooner you address the issue and craft a plan, the better off you'll be. Here are seven ways to improve your financial health for retirement:

1. Stretegic Investments: Keep On Contributing Having watched your 401(k) account drop with the volatile economy in the last year, it may be tempting to pare back or even stop contributions. Certainly you should pay attention to what's happening with your retirement accounts, but experts advise not to stop contributions due to short-term declines in the market. Investing while values are down can pay off; investment advisors call this technique dollar cost averaging. By buying when stocks are down, you get more for your money and can make price fluctuations work to your advantage. Remember you're not investing for the next year, but for the next ten to twenty years. Make sure also that you're contributing at least up to the amount your employer matches. Otherwise you're leaving money on the table.

2. Play Savings Catch-Up If you're 50 or older, government tax provisions let you put an extra $5,500 into a 401(k) this year. That's on top of the $16,500 you're already allowed to contribute. For a traditional IRA and Roth IRA, you can add another $1,000 on top of the $5,000 contribution limit, and for a SIMPLE IRA, you can throw in another $2,500 in addition to the $11,500 limit. The federal government created these catch-up provisions because of concern over Americans' lagging retirement savings. Be aware that not all employer plans allow catch-up contributions, so check with your employee benefits department.

3. Delay Retirement Working just a few more years past age 62 while continuing to save can significantly ratchet up your retirement income. The longer you work, the bigger your Social Security check and your nest egg will be.

4. Cut Expenses Keep track of your spending, and look for places to cut. Little things add up, and there are dozens of ways to trim your budget and provide extra money for savings. Borrow DVDs and books from the library instead of buying them, cut back on lattes, refinance your mortgage to a lower rate, and shop around for the best insurance rates. Try these and scour your budget for other ways to save.

5. Work Part-time A growing number of retirees are going back to work part-time, not only to earn more money but to stay engaged with life. A new study, in fact, found that people who continue doing some work in their field after they retire enjoy better physical and mental health than those who stopped working completely. The University of Maryland study tracked 12,000 workers ages 51 to 61 starting in 1992. People who scaled back their work, rather than stopping completely at retirement reported lower rates of major ailments like heart disease and depression.

6. Downsize If you own your home outright, consider moving to a smaller, less-expensive house and investing the difference between the sales price of your old home and the purchase price of your new place. Or look into a reverse mortgage to augment your income.

7. Get the Most From Your Investments Consult with a financial advisor to choose the best investment strategy and the right mix of stocks, bonds, and cash. Don't cheat yourself on short-term investments. Shop around for the best CD rates and best savings account rates.

You may not be able to catch up to where you'd be if you had started saving for retirement in your 20s, but rest assured you can do a lot now to prepare for a good life in the years ahead.


Walter Updegrave • Play catch-up with your retirement savings • Jun 02, 2009 • CNN • http://money.cnn.com/2009/06/01/pf/expert/retirement_catch_up.moneymag/index.htm

Employee Benefit Research Institute • Retirement Confidence Survey • Nov 03, 2009 • http://www.ebri.org/files/FS-04_RCS-09_Age.FINAL.pdf

Kiplinger's Personal Finance • Help for Retirement Savings from Uncle Sam • Oct 21, 2009 • http://www.kiplinger.comhttp://www.kiplinger.com/businessresource/forecast/archive/help-for-retirement-savings-from-uncle-sam.html

American Savings Education Council • It's Never Too Late to Save • http://www.choosetosave.org/brochures/pdf/nlatesav.pdf

Cameron Huddleston • Should you work during retirement? • MSN MoneyCentral: http://moneycentral.msn.com/content/RetirementandWills/P64201.asp

Amy Norton • Working After Retirement is Good For Your Health • Oct 22, 2009 • AARP: http://bulletin.aarp.org/yourmoney/work/articles/working_after_retirement_good_for_your_health.html

Lisa Scherzer • Match Game: How to Cope With a Suspended 401(k) • Jul 30, 2009 • Smartmoney: http://www.smartmoney.com/personal-finance/retirement/match-game-how-to-cope-with-a-suspended-401k/

Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

Bank Name: Your E-mail: Description (Please include URL):
We HATE spam as much as you, we don't sell your e-mail address!