When you started out in the workforce, retirement probably seemed like a lifetime away, so it may have been easy to let your savings slip. Once you’ve reached middle age, however, the need for retirement savings becomes crystal clear. That’s especially true if you’re helping care for aging parents who don’t have the financial means to support their retirement. Add to that the problems caused by the recent crisis, and your savings may be dwindling in front of you.
Saving for retirement can be daunting, but it’s better to start late than never. Here are 4 tips to get started saving, and catch up on your retirement account.
Cut Expenses to Increase Savings
If you’re not in the habit of saving for retirement, it can be hard to find the room in your budget. Reducing your expenses will leave you with more money to save for retirement. This can include small changes — like cutting the cable bill and not eating out (bonus: you avoid COVID stress!). Or, you can make more dramatic changes, like downsizing your home or taking on a roommate.
Most women have many people pulling at their purse strings. You might feel pressure to support your own aging parents, or to contribute to your children’s college education. However, it’s entirely ok — and responsible — to prioritize your own financial security.
Remember, prioritizing your retirement isn’t selfish. In fact, it will help protect your children, since you’re less likely to need their support in old age if you’ve planned properly for retirement.
The best thing you can do for retirement savings is to start today. Retirement is a time game: the longer your savings sit, the more they’ll grow, thanks to compounding interest. So, stop lamenting the years you didn’t save or worrying about finding the perfect account. Instead, challenge yourself to open an account and start saving immediately.
If your employer offers a saving match, contribute at least the minimum amount to get that match. If you don’t, you’re leaving free money unclaimed.
Make Up for Lost Time
The government knows how important retirement savings are, which is why the IRS allows people ages 50 and older to make “catch-up” contributions for the retirement accounts. The government limits the amount that people can put into a tax-advantaged retirement account, and that limit is higher for people over 50.
Many people can’t hit the yearly savings maximum, but if you are able to take advantage, these “catch-up” contributions can make a big difference. You can find out more about catch-up contributions here.
Saving for retirement hits on a lot of common fears, forcing us to confront our finances and mortality. But if you focus on the positive – visualize yourself on a beach with a Mai Tai in hand once you’ve stopped working, it will help you understand what you are making sacrifices for now.