7 Ways to Catch Up if You’re Late on Retirement Savings

Experts like Fidelity Investments recommend you save at least 10 times your salary by your 67th birthday if you want to have a comfortable retirement. Supplemented with Social Security, this may be enough to cover your expenses through an average life expectancy.

Those numbers account for increasing income and compound interest as you age. An on-time retirement savings looks like this:

  • 1x your salary saved by age 30
  • 3x your salary saved by age 40
  • 6x your salary saved by age 60
  • 10x your salary saved by age 67

If you’re on track, fantastic. If you’re late, you have some catching up to do.  If you haven’t set up a personal budget, make that the first thing you do. Once that’s in order, you’ll be able to implement the strategies below to get ready for your golden years…

1. Adjust Your Retirement Age

If you’re behind on retirement savings, you might need to delay your retirement date. “Full Retirement Age (FRA)” is the term used by Social Security to define when you can begin collecting your full retirement benefits. As of 2020, that age is:

  • 67 for people born in 1960 or after
  • 66 for people born between 1943 and 1954
  • 66 plus two to 10 months for those born between 1955 and 1959

If you claim your benefits after your FRA, they increase by 8% per year you put off retirement until your 70th birthday. If you start claiming benefits after 70, your Social Security benefits don’t increase.

Each year you stay at work and put off claiming your benefits, you increase your retirement funds in two ways: You save more money from your employment income, and your Social Security check grows.

2. Find Extra Money

Most people fall behind on their retirement savings because their income is too close to their expenses. You have a variety of options for increasing your income, including:

  • Retraining or going to school so you can qualify for a better job
  • Working with your employer for growth and promotion opportunities
  • Looking for a new employer who pays better
  • Taking on part-time work outside your regular job
  • Working a side gig like Uber driving, house-sitting, or dog-walking
  • Starting a part-time small business

You can also earn extra money in a short burst or one-time effort. Use this cash infusion to start your retirement fund or pay off high-interest debt so you can start strong in your retirement savings efforts. Some techniques for this include:

  • Holding a garage sale to declutter the house and make some extra money
  • Selling unused furniture, books, and electronics online
  • Working overtime when it’s available

In both cases, more money brought in means more money to save for retirement. Just make sure you don’t give in to temptation and splurge when you get the extra cash.

3. Start Downsizing Now

When you retire, you’re going to downsize. You’ll spend less on gas and business clothes and probably eat out less often. You might move into a smaller home or get rid of a family car. Your expense base will be lower with your new lifestyle.

Some of that downsizing won’t impact your quality of life if you do them right now, and each item will increase how much you can save toward retirement.

Start by identifying the things you will do during retirement to cut costs. Then, identify the ones you can implement before you retire. Set a schedule, then make it happen.

4. Automate Your Savings

You probably have heard the phrase “pay yourself first.” It’s good advice but sometimes hard to wrap your head around. Here’s how it works.

Most people have the following process for saving money:

  1. Get paid.
  2. Spend money.
  3. Save what’s left just before the next payday.

When you pay yourself first, you use this process:

  1. Get paid.
  2. Save the money you want to save.
  3. Get by for the rest of the pay period on what’s left.

The second method prioritizes savings and long-term financial health and helps you stick to a budget. It prevents you from splurging simply because there’s money in your checking account.

Take this one step further by automating your savings. Some employers allow you to do this as part of your direct deposit. If yours doesn’t, you can set up an automatic transfer on payday or the day after through your bank. Either way, it sets a hard limit on your spending by putting retirement savings first.

5. Follow the 50/50 Rule

The 50/50 rule is a simple way of handling money that comes in above your regular income for a month. Examples include overtime pay, bonuses from work, tax refunds, and the proceeds from selling that old couch.

Whenever you get extra money, save half of it immediately. The other half you can spend as you like. This allows you to treat yourself from time to time while still making extra progress toward your long-term financial goals.

Bonus points if you also apply this rule to any increases in your regular income. For the next raise you get, put half of that additional income toward automated savings. The rest you can use to enhance your lifestyle.

If you’re far behind on retirement progress, you might want to change this to a 75/25 rule or even a 90/10 rule.

6. Do a Savings Challenge

If you search for “savings challenge” online, you’ll find dozens of options. Each is a unique, gamified way to make progress toward financial goals. A few popular examples include:

  • The 52-week challenge, where you save $1 on the first week of the year and increase it by $1 each week until you save $52 on the last week of the year.
  • The no-spend challenge, where you commit to spend no extra money for a set period of time. Done regularly, it can add up to serious savings.
  • The $1 challenge, where at the end of each day, you put any remaining dollar bills into a savings jar.

You can find all kinds of variations on these challenges with a quick search. Pick the one you like best, then take it on.

Read “How the 10/10/10 Formula of Savings Rescues Overstretched Family Budgets”

7. Reprioritize

When many people think they don’t have money to save toward retirement, what they mean is they’re prioritizing more immediate spending over preparing to retire. This is fine when those priorities are food, shelter, and medical care. It’s less acceptable when they’re fancy coffee or compulsive online shopping.

Read “Conscious Spending: How to Live a Richer Lifestyle Without Busting Your Budget”

Spend some time looking over your expenses and find the things that aren’t as important as a healthy, comfortable retirement. Use that to tighten your budget and get started toward building the savings you need.

Final Thought

It can be daunting to look at this whole list. That’s a lot to do, and some of it might be out of your reach at the moment. Don’t worry about that. Instead, focus on one item. Make it either the easiest one for you to do or the one you think will make the most significant difference.

Once you have that well in hand and your monthly cash flow has adjusted to it, take on another. Keep doing that until you have all 7 in place. If you do one a month, you’ll get them all set up in just over half a year.

Stephen McWinter is a financial journalist in Tampa Bay, FL, who writes about retirement strategies.

Expert Interview: Cultivating an Attitude of Gratitude

Did you know there is scientific evidence that gratitude can lower your blood pressure, improve your digestion, reduce your stress and boost your immune system?

And it can have an amazing impact on how you respond to events, people and situations… and how they in turn respond to you.

The wonderful thing is that it can be cultivated and nurtured.  Result:  You bring out the very best in yourself and your life and the best in those whom you love, work and play with.

Buy Catherine Price's book, Gratitude: A NovelIn my 30-minute interview with best-selling author Catherine Price, you’ll discover some practical tips for cultivating an attitude of gratitude – and multiplying your blessings.

Catherine is the author of Gratitude: A Journal (available here on our Amazon store).  It’s a perennial best-seller that gives you a great way to keep a daily record of life’s little blessings, and it’s filled with a year’s worth of insights, prompts and inspiring quotes. [Read more…] “Expert Interview: Cultivating an Attitude of Gratitude”

30 Reasons Not To Worry
About A Market Crash

My favorite financial journalist is Brett Arends, a regular contributor to The Wall Street Journal and MarketWatch. He’s one of the very few who doesn’t have his head up his you-know-what.

Anyhow, Brett just published a tongue-in-cheek article about all the reasons the stock market is just going to keep going up and up. And I strongly encourage you to read it here.

Some of my favorites of Arend’s 30 reasons not to worry include…

  • Yes, stocks look expensive compared with annual sales, net asset values, gross domestic product, the replacement cost of company assets, and the average earnings of the past 10 years. But none of that matters because valuation measures are completely irrelevant.
  • You bears “just don’t get it.”30 Reasons not to worry about a Stock Market Crash
  • The S&P 500 is almost three times as high today as it was in 2009. Therefore it must be three times as good a deal!
  • People who aren’t bullish are losers and sissies.
  • Everybody on Wall Street says this is a great time to buy stocks, and if they don’t know, who does? [Read more…] “30 Reasons Not To Worry
    About A Market Crash”

Beware the "Behavior Gap": Interview with Carl Richards

I’m delighted to share this fascinating interview with Carl Richards with you.  Carl writes a weekly essay for The New York Times “Your Money” section and has been a Certified Financial Planner for 15 years.  His witty sketches have appeared in numerous publications, including the Wall Street Journal, Morningstar and The New York Times.

Carl Richards
Carl Richards, the Behavior Gap™

Over the years, he noticed that the actual real-life returns the average investor gets are dramatically lower than the return of the average mutual fund.  He named this phenomenon the Behavior GapTM and began devoting his energy to explaining why the Behavior Gap exists and what constitutes smart investor behavior.

Carl recently shared his surprising insights, tips and strategies with me in an audio interview.  I hope you’ll listen to it today – I know you will find it very helpful!

You can listen to the interview by pressing the play button below, or you can download the entire interview as an Mp3 and listen on your own player or iPod…

You can also download a transcript of the interview here.

Here’s what you’ll discover in this interview…

  • Why 80% of all actively managed mutual funds and investment advisors underperform the overall market
  • The #1 biggest mistake individual investors make over and over again… and why most will keep making it
  • The keys to being a smart investor
  • How to determine if you should be investing in equities at allfear-greed-cycle-high
  • The real key to happiness (it isn’t what you might think!)
  • How to practice “radical self-awareness” so you control your money rather than letting it controlling you
  • Why happiness is directly related to how much you focus on the things you can control
  • How to increase your wealth and happiness by focusing your energy on three things you do have control over!

You can listen to the interview by pressing the play button below, or you can download the entire interview as an MP3 and listen on your own player or iPod…

You can also download a transcript of the interview here.

Improve Your Financial Picture…

To find out how much your financial picture could improve if you added Bank On Yourself to your financial plan, request a free Analysis. If you’re wondering where you’ll find the funds to start your plan, the Bank On Yourself Professionals are masters at helping people restructure their finances and free up seed money to fund a plan that will help you reach as many of your goals as possible in the shortest time possible.

Six scary facts affecting your finances

A number of items have come across my desk recently that should spook the living daylights out of you…

Scary Fact #1: 40 percent of all workers plan to delay retirement

61% blamed the decline in their 401(k) for this.  And a majority said they’re prepared to spend less in retirement according to a new survey by Towers Watson.

Scary Fact #2: Nation’s retirement shortfall exceeds $4.6 trillion!

A recent study revealed Boomers and Generation X’ers are coming up frighteningly short on their retirement savings.

And when nursing home and home health care costs are added in, that shortfall doubles, according to a study released this month by the Employee Benefit Research Institute (EBRI).

Nearly half of both Baby Boomers and Gen X’ers won’t have enough funds to cover living expenses, according to an EBRI report released earlier this year.

Scary Fact #3: New 401(k) disclosure rules don’t put a lid on fees

New regulations announced this month by the Department of Labor will require better disclosure of all the hidden fees you’ve been paying in your 401(k), starting in January, 2012.

scary bat

But, for all the noise on Capitol Hill about this horrifying issue, NO regulations have been proposed or even discussed to reduce the confiscatory fees you pay!

scary bat

Even a one percent higher fee can cost an employee $64,000 or more in realized savings by age 65, according to the DOL’s own estimates.

The 401(k) situation is so bad that you will probably need to get an average annual return of 8% to 10% – just to break even!

Not convinced?  Check out the shocking exposé Pulitzer Prize-nominated journalist Dean Rotbart and I recently co-wrote on this.

Scary Fact #4: Hope is not a strategy

We’re headed for a retirement train wreck, and it’s going to get really ugly over the next 15 years”
– Rob Arnott, a widely respected market strategist

In a well-researched article in this month’s Fundamentals Index Newsletter, the authors point out that the return assumptions built into pension and retirement plans today assume that “everything will go right.”  They’ve relied on unrealistic assumptions.  The authors also go on to demonstrate why returns are likely to be much lower in the future.

We’re relying on hope.  But hope is not a strategy; hope will not fund secure retirements.  We’re planning for the best and denying that worse can happen.  It makes far more sense to hope for the best, with plans for realistic outcomes – and contingency plans for worse ones.”1

Scary Fact #5: 40 percent of retirees were forced out of work early

Remember the scene from the 1983 movie classic, “The Big Chill,” where the character played by Jeff Goldblum asks…

Have you ever gone a week without a rationalization?”

Well, many boomers today are trying to rationalize away the fact that they won’t be able to retire when and how they had planned by trying to convince themselves that retirement is overrated.  They now talk about continuing to work in some capacity as long as they can.

While there’s no question that this can give you more of a sense of purpose and fulfillment and keep you from dying of boredom, the reality is that many people are being forced to retire earlier than they can afford to.  Job layoffs and health issues are the primary reasons for this.

I love what I do, and I hope to be doing it for a long time.  But shouldn’t the decision to retire – or not – be a matter of choice, not necessity?

The reality is that you may not have a choice.  Nearly four in ten retirees say they were forced out of work earlier than they’d planned because of layoffs, poor health or the need to take care of a loved one, according to EBRI.

Scary Fact #6: All Bank On Yourself policy owners received a guaranteed increase and a dividend – again

I was just checking to see if you were paying attention! That’s not a scary fact (unless you’ve been procrastinating on starting to Bank On Yourself).

Halloween CashWhole life insurance is an asset class that has increased in value during every stock market decline and every period of economic boom and bust for more than a century.

A dividend-paying whole life policy grows by a guaranteed and pre-set amount every year.  In addition, the growth is exponential, meaning it gets better every single year with no luck, skill, or guesswork required to make that happen.

This gives you some protection against inflation and provides peak growth when you need it most (retirement).

A Bank On Yourself-type policy includes an option that turbo-charges the growth of your cash value in the policy.

You can know (rather than hope) the minimum guaranteed income you can take from the policy in retirement.

And, you can access the money in retirement with little or no tax consequences, under current tax law.

You can also have access to capital when you want it and for whatever you want.  No nosey credit apps or pledging your first born.

So, if you haven’t added Bank On Yourself to your financial plan yet, doesn’t it make sense to request a free Analysis and find out what your bottom-line numbers and results could be?

There’s no obligation, it’s not scary, and no one’s going to twist your arm!  If you haven’t already started to Bank On Yourself, please take the first step today and take back control of your financial future!
Request Your Analysis Button

1. “Hope is Not a Strategy,” Fundamentals Index Newsletter, October 2010 Issue

What If Suze Orman and Dave Ramsey Discussed Bank On Yourself?

It seems like every week now, someone writes us to let us know they forwarded one of my blog posts to Suze Orman and Dave Ramsey, or urged them to take me up on my standing offer to debate them about Bank On Yourself.

As I’ve said numerous times, I know Suze and Dave have helped many people get out of debt and get their financial act together.  However, there are two critical areas we strongly disagree on.

Neither of them has taken me up on the offer to debate me – yet. But I can’t help but wonder if they’ve ever actually checked into Bank On Yourself.

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What would it be like to be a fly on the wall as Suze and Dave discuss Bank On Yourself? No need to wonder any longer, as our hidden video camera captured it all. Just click on the play button…

In case you’re wondering, the statements made by Suze and Dave in the video about why you should invest in mutual funds and why you should avoid whole life insurance are direct quotes from their books.

And Suze really did tell the New York Times she doesn’t follow her own advice about investing in the market.

[Read more…] “What If Suze Orman and Dave Ramsey Discussed Bank On Yourself?”

Wall Street Journal Exposes Stock Market Myths!

A very revealing article appeared in the Sunday, July 25 edition of the Wall Street Journal entitled, “Ten Stock-Market Myths that Just Won’t Die.”

Maybe you don’t quite believe what I’ve been saying for years.  This article confirms exactly what I’ve been trying to tell you…

WSJ 10 Stock-Market Myths That Just Won't Die

This article is must-reading for anyone who’s been scratching their head and wondering…

If what they say about the long-term returns you should be able to get in the stock market is true, how come I’m not rich?!?

Please pay particular attention to…

Myth #1: “This is a good time to invest in the stock market”

Myth #2: “Stocks on average make about 10% a year”

And the article author’s insight into Myth #10: “Stocks outperform over the long term” is priceless.

I’ve quoted many sources confirming what this Wall Street Journal article says.  How many more sources do you need to hear it from, before you request a free Analysis that will show you how much your financial picture could improve if you added Bank On Yourself to your financial plan?
Request Your Analysis Button

gambling with your financial future and start knowing how good it could be!

Lessons from a lost decade

I’ve lost a bet.  I’ve lost my keys.  But I’ve never lost a decade – until now.” – Sam Stovall, S&P’s chief strategist

Peptol Bismo2l

The S&P 500 ended the past decade down almost 25 percent below where it was ten years earlier.  And that doesn’t even factor in the 29% inflation we experienced during the decade.

Peptol Bismo2l

since the end of 1999, the S&P 500 stock index has lost an average of 3.3% a year, on an inflation-adjusted basis, even after including dividends, according to the data compiled by Charles Jones, finance professor at North Carolina State University.1

Hmmm… so what does that mean to the typical family in dollars and cents?

You may want to grab a bottle of Pepto-Bismol, because it isn’t very pretty…
Here’s what inflation and negative returns have done to a nest egg invested in an S&P 500 index fund (the way most Americans’ retirement savings are), over the past decade…

purchasing power of your money
purchasing power of your money

You now need a 39.9% increase just to get back to where you were ten years ago!

Given that the stock market has just experienced its fastest climb since 1933, how likely do you think it is that we’ll have another 39.9% rise this year? Especially given soaring government spending, stubbornly high unemployment, and looming tax hikes.
[Read more…] “Lessons from a lost decade”

Six Frequently Asked Questions about Bank On Yourself

FAQ

I thought you might find it helpful to have the answers to the six questions about Bank On Yourself we’re most often asked – right at your fingertips.

FAQ

How many of these questions have you been wondering about?

FAQ?FAQ #1: How does Bank On Yourself compare with traditional investing and savings strategies?

You can compare the Bank On Yourself method to traditional investments here, including stocks and mutual funds, a 401(k), a ROTH plan, real estate, gold, commodities and several other investments.

If there’s a different financial product or strategy that you think can match or beat the Bank On Yourself method, I encourage you to take the $100,000 Challenge. If you’re right, you could pick up an easy $100K!

FAQ?FAQ #2: How does Bank On Yourself let you recapture every penny you pay for major purchases like cars, vacations, business equipment or a college education?

I’ve summarized this in a short video overview of how Bank On Yourself works.

However, for a more detailed explanation, you’ll want to review Chapters 2, 6, and pages 52-54 of my best-selling book, Bank On Yourself. If you don’t have the book, we offer a 35% discount on it.

FAQ?FAQ #3: I’ve heard people like Dave Ramsey and Suze Orman say whole life insurance is a lousy place to put your money. Is a Bank On Yourself-type policy different from the kind they’re talking about?

[Read more…] “Six Frequently Asked Questions about Bank On Yourself”

Think you have to risk your money to get big returns? Hogwash!

According to a recent comment on this blog, I’m full of it. Apparently, the author thinks I pulled the following statement out of my butt…

The reality is that the typical mutual fund investor has actually been losing 1 percent per year over the last 20 years, after adjusting for inflation.”

InflationThe statistic comes from the respected research firm, Dalbar, Inc., in its 15th annual study of mutual fund investor behavior. The study measures the returns investors actually get, not the returns they wished they got.

According to Lou Harvey, the president of Dalbar, the study once again revealed that

“investor returns lag what performance reports and prospectuses would lead one to believe is achievable. While those returns are theoretically achievable, the reality is that investors are not rational, and make buy and sell decisions at the worst possible moments.”

Let me paint a picture of how this happens: Lets say you do what the author (who calls himself “David K.”) of the rather nasty blog comment suggests and buy “simple index funds” and hold them for twenty years.

[Read more…] “Think you have to risk your money to get big returns? Hogwash!”