Broker Check

Plan Now! The Right Steps Can Ease Retirement Pain.

by Howard Hook, CFP®, CPA

As published in the New York Daily News "The Money Pros" column, May 18, 2015

Question: I had always planned to retire by the time I was 65 years old. But now that I’m only a couple of years away, I’m worried I haven’t saved enough to carry me all the way through my retirement years. Is it too late to do something?

Answer: Let’s face it. Most Americans, regardless of age, are not saving enough for retirement. 

If you are young enough, there is still time to make some changes and course-correct. But what if you’re between 60 and 70? Is there no hope?

Don’t despair. All is not lost.

Here are four things you can still do to plan for retirement if you think you are not financially prepared:

Set up an investment program. When it comes to wanting to save more money we all have the best of intentions. Our brains, however, are designed for instant gratification.

Setting up an investment program where a fixed amount is automatically taken out of your paycheck and invested removes the temptation to spend the money. 

Whatever you think you can save, try to increase that amount by 5%. Go through your expenses and cut your spending by 5%. In almost all cases, this can be done.

Consider working longer or part-time. Most people assume that retirement is linear: Today I am working; tomorrow I am retired.

A phased retirement where you gradually reduce your working hours and eventually stop working not only can provide additional income to you to use in retirement, but can help bridge the mental hurdle many people need to get over once they are retired.

Going from being a useful part of an organization to not being needed at all is tough for many. A phased retirement helps alleviate this and can allow you to retire on your own terms while saving more money. 

Increase your contributions to your 401(k) plan at work. Socking more money into your 401(k) plan at work is a great thing to do at any age, but is especially important later in the game. Contributing more may result in a larger employer match (free money!).

Whatever amount you think you can save, try to increase it by an additional 15%. The additional amount contributed to your 401(k) will reduce your income tax, allowing you to save more.

For example, deferring an additional $100 per paycheck may only reduce your take-home pay by $70. If you can afford to have your paycheck reduced by $100, then you can contribute $130.

Consider delaying receiving Social Security benefits. Many people begin collecting Social Security benefits once they reach their normal retirement age regardless of whether they are still working.

However, if you wait to collect beyond your normal retirement age, the amount of your benefits will increase 8% per year until age 70.

For some people, that could mean a 30% increase in benefits for the rest of their lives.