LIVE

It’s possible to feel good about retirement, whether you have a nice nest egg or not even a fledgling fund.

By Kara Cutruzzula
April 01, 2021
Advertisement

Let's get this straight: You deserve the retirement of your dreams. But real and urgent issues might be blurring the (possibly beachside) retirement picture in your mind. Only a quarter of U.S. women believe they're on track to achieve their retirement income needs, according to a recent survey. Roadblocks include the gender pay gap—women earn, on average, 82 cents for every dollar earned by men—and the high cost of caregiving later in life.

Not to mention the pandemic. The Covid-19 crisis cut jobs and forced many women to step back from their careers to tend to their kids and oversee remote learning. In fact, as of January, only 57 percent of American women were working or looking for work.

Rest assured: There is still time to act. Whatever your retirement goals—maintaining your current lifestyle, upgrading, making a dramatic move—you can find the right path forward. Just take it one step (and life stage) at a time.

If you haven't started saving…

You're not alone. According to a Federal Reserve Board report, 25 percent of the working population has nothing saved for retirement. But it's important to start as early as possible so you take advantage of compound interest. If you begin investing $100 a month at age 25, you could have almost twice as much in your account by the time you retire as someone who started at age 35, says Gina Zakaria, founder of Saving Whiz, a financial education platform.

Do this ASAP

Check if your employer offers a 401(k) and matches employee contributions, which means it will throw in some or all of what you do, up to a certain percentage of your salary. “Many people don’t think about employer matching as part of their compensation, and they end up leaving a lot of money on the table,” Zakaria says. “That’s like saying, ‘Instead of paying me $20 an hour, it’s OK to pay me $17.’ ” Try to contribute at least enough to earn the full employer match.

RELATED: How to Calculate Your Total Compensation

Do this in the next year

If you’re a gig worker, entrepreneur, or independent contractor and don’t have a retirement plan through a company, open an IRA or Roth IRA, says certified financial planner Sarah Catherine Gutierrez, author of But First, Save 10: The One Simple Money Move That Will Change Your Life. “If you make less than $60,000 annually, aim to save 10 percent in your retirement account,” she says. “If you make more, consider a Simplified Employee Pension plan or a one-participant 401(k) plan, sometimes called a solo 401(k).” In any of these scenarios, the key is automation—embrace that “set it and forget it” mentality.

Do it for your dreams

Saving for retirement is a gift to your future self. For present-day peace of mind, build an emergency fund. Aim to stash three to six months’ worth of expenses in a high-yield savings account, Gutierrez says.

If you're mid-career and your spending has gotten off track…

Even though you might be earning more money, saving often takes a backseat when you're busy with expensive life events, like raising children. But keep with it. "Saving for retirement should be a higher priority than saving for your kids' college fund," Zakaria says. "Your child can apply for grants and scholarships, but you can't apply for those in retirement."

Do this ASAP

Audit your current expenses, which could look very different now than they did in previous years. If your food-delivery spending has skyrocketed, for example, Zakaria recommends making a “dupe takeout” dinner, in which you recreate one of your favorite restaurant meals at home. “The difference can go right into savings,” she says.

Do this in the next year

List all of your current and future priorities, then create a high-yield savings account for each goal, says certified financial planner Barbara Ginty, host of the podcast Future Rich. Give each account a nickname—like “house down payment”—and automate contributions. Make sure that each priority is worthy, and that your retirement is among your top commitments.

Do it for your dreams

Use pay bumps wisely. If you nab a cost-of-living raise of 3 percent, Ginty recommends putting half of that raise into your retirement account to grow your wealth.

If you're over 50 and need to ramp up savings…

"You're in the homestretch for retirement, and it is really important to be laser focused," Ginty says. "You have between 10 and 20 years to secure your future if it hasn't been a priority up to this point."

Do this ASAP

Decide how much money you’ll need to retire, then work backward from that number to determine how to save enough to get there, Ginty says. Consider hiring a pro who can help you figure out that target amount and strategize. You might decide to sell an asset or increase your contributions. Or you might want to work a bit longer, which could net you higher monthly social security payments down the road. Delaying your social security benefits until you retire can increase your payments by up to 8 percent per year, depending on how old you are.

Do this in the next year

After you turn 50, you can take advantage of annual catch-up contributions. This is the fastest way to boost your retirement account and reduce your taxable income. In 2021, you can invest an extra $6,500 in your 401(k) account.

Do it for your dreams

If you’re just starting to save for retirement, Gutierrez advises socking away 30 to 40 percent of your paycheck. You may need to make a major change, like moving into a smaller house or driving a cheaper car. You could even talk to your boss about working remotely permanently, which might let you move somewhere with a lower cost of living. If you feel held hostage by the routinized perks of your lifestyle— manicures, grocery delivery, a weekly cleaning service—flip the script and say, “Retirement is the priority, and everything is measured against that right now.”

If you've recently been downsized and become semiretired…

This unfortunate reality can come as a shock and disrupt carefully laid plans. But keep your hands off that 401(k)! Your retirement plan is your most valuable investment, often worth more than your home, Ginty says.

Do this ASAP

Review your credit card and debit statements and your insurances. What can you reduce or negotiate? “A lot of auto insurance companies give a 15 percent reduction if you do a safe-driver program,” Gutierrez says. Run your new budget numbers. Will you still be able to cover your annual cost of living? Investigate the price of health insurance and think about your current needs. It might be cheaper to get high-deductible insurance through your state marketplace than to pay for COBRA coverage.

Do this in the next year

Start a paying side project to keep working in retirement. Think broadly about your experience and “imagine the wisdom you have gained from an entire career,” Gutierrez says. Consider using your expertise in your field—be it human resources or tech—to become a coach or consultant.

Do it for your dreams

Make sure your big-picture financial plans are still on track, whether that’s paying off your mortgage by a certain age or completely retiring in a few years. A layoff might trigger you to dip into your emergency fund, but leave your retirement account alone. And try as much as possible to maintain the habit of saving for retirement.