The sooner you start putting aside money for retirement, the more you might have once that highly-anticipated day arrives. We have all heard this before, but for some people it is easier said than done. Saving for college tuition, purchasing a new home, unforeseen medical expenses, or life’s other necessities, surprises, or even enjoyments can cause investors to postpone saving for retirement. Starting the retirement planning process late in one’s life can be a daunting challenge, but it is by no means impossible.
Crunch the Numbers
The first step to getting back on track is to put together a budget—this will force you to focus on your financial situation and can serve as a roadmap to success. Once you have outlined all of your expenses, simply subtract the total from your net income. The resulting number will give you a clear indication of how much you can potentially save, and also help you identify areas in which you may be spending too much.
Cut Any Unnecessary Expenses
Obviously there are essential expenses that cannot be eliminated: food, electricity, etc. However, most people can identify some areas, like entertainment, that are not vital to one’s existence and can be cut back on. The more areas that you can trim will lead to more money that can be earmarked for retirement.
Take Advantage of Catch-up Contributions
Catch-up contribution limits allow investors age 50 and above to increase their contribution at a time when retirement is quickly approaching. For example, they can make an extra contribution of $5,500 in 2010 to their 401(k), equating to a maximum contribution of $22,000. IRA catch-ups are $1,000 in 2010, leading to a maximum contribution of $6,000.
Push Back Your Retirement
The longer you can remain in the workplace, the more money you will have available to save. That dream of retiring at the age of 65 may have to be just that—a dream. However, keep in mind that many retired individuals return to the workforce a few years later just to keep themselves busy.
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