A recent Northwestern Mutual study found a huge gap between how much baby boomers have saved for retirement and how much they need to retire. They expect to need $990,000 to retire comfortably, but on average, they have only saved $120,300.
The survey found that the average age people start saving for retirement is 31. Gen Z is ahead of the curve, starting 22-15 years earlier than baby boomers, who only started at age 37. As they approach retirement, baby boomers who fell behind on their retirement plans often face a dilemma: retire without the financial safety net they intended to have, or continue working and struggling for many more years.
If you find yourself in this situation, you can change it. Here’s how you can boost your savings quickly and enjoy peace of mind and freedom in retirement.
Maximize your retirement savings
Maximizing your extra paying capacity can help close the gap between your current savings and your retirement goals. If you’re over 50, you can contribute an additional $7,500 to your 401(k) plan and an additional $1,000 to your individual retirement account.
If you’re working and your employer offers a 401(k) match, make sure you understand the terms and contribute enough to receive the full match. This is basically free money added to your retirement savings.
Optimize Your Investment Strategy
Investments play a key position in developing your nest egg, and there are numerous methods of optimizing your standard funding strategy. Diversifying your portfolio, for example, can assist lessen chance and increase returns.
Investing is mostly a very character matter, and getting the proper expert recommendation could make all of the difference. The examine suggests that simplest 17% of U.S. adults have sought recommendation from a economic expert, and 38% of boomers say they haven`t taken any steps in any respect to keep away from outliving their savings.
Spend Less, Save More
Reviewing your spending weekly, monthly, or yearly to eliminate unnecessary expenses may seem like a small expense, but seemingly insignificant expenses can add up.
Keep an eye on big-ticket items, too. For example, consider moving to a smaller home to reduce your living expenses and put the savings toward retirement savings.
Take Advantage of Tax-Advantaged Accounts
Just over half (56%) of baby boomers say they plan to cover medical expenses in retirement. If you have high-deductible health insurance, contributing to a health savings account can help mitigate these expenses and also provide three tax benefits: HSA contributions are tax-free, qualified withdrawals are tax-free, and the account accrues higher taxes. Free. The problem is that the plans in question come with high out-of-pocket costs. So weigh the benefits and risks before switching to an HDHP or ruling out plans with lower deductibles and out-of-pocket maximums.
You can also consider converting funds you have in a traditional IRA or 401(k) to a Roth IRA to take advantage of future tax benefits. Keep in mind, though, that you have a five-year holding period. If you withdraw your funds sooner, you’ll lose the tax benefits of a Roth IRA.
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