Put off saving for your retirement? You’re certainly not alone! A closer look at recent Survey of Consumer Finances data reveals median retirement savings of $18,800 among investors under 35, $45,000 among those aged 35-44, $115,000 among 45-54 year olds, and $185,000 among those aged 55-64. These monetary figures are hardly enough to make it through retirement, especially when you consider that the average retiree household spends an average of $57,818 annually.

Also keep in mind that these numbers will only increase as time goes on. For example, average retiree household spending rang in at $45,756 (~$3,800 a month) in 2016: $6,385 less than current figures. The further away you are from retirement, therefore, the higher the threshold with respect to annual spending.

While saving for your future is admittedly stressful—especially if you got a late start—the good news is that it’s never too late to save. With some mental discipline, you too can build a solid retirement fund. Here are some tips to do just that so you can enjoy your golden years.

Identify how much money you’ll need in retirement

As a good first step, think long and hard about where you want to live during retirement; housing expenses, after all, will likely eat up the largest chunk of your budget (with this category representing over 35% of annual retiree household expenditures, on average).

After making a decision in this respect, consider how you’ll allocate all of your newfound free time. Regardless of how your lifestyle takes shape, the goal here is to find new, interesting activities to fill your days while putting your mind and body to work: zeroing in on endeavors that inspire you and give you a new sense of purpose.

Your calculation should also factor in taxes on retirement account withdrawals (e.g., on your 401(k), traditional IRA, or pension), inflation, and healthcare coverage—especially considering Medicare doesn’t cover long-term and many other out-of-pocket expenses.

As developing a vision for retirement most certainly requires some effort and becomes even more challenging if your ideals differ from those of your partner, don’t expect to determine this number overnight. In the meantime, click here to read a few common rules of thumb to familiarize yourself with how much you’ll need for retirement.

Slash expenses

While you’re calculating how much money you’ll eventually need as a retiree, one of the first things you can do right now is cut current costs across various areas of your life…

Slash daily living expenses

You can take many different approaches here. A few such options? Utilizing a tool such as Mint.com, seeking a breakdown of spending categories from your credit card company, or simply pulling your bank and credit card statements for the intel you need. Regardless of the method used, be sure to retrieve 12 months of data (so you don’t miss any expenses paid on a quarterly or annual basis) and drill down into specifics including co-pays, insurance premiums, and clothes—breaking down all those Amazon purchases into separate buckets. The objective here is to fully understand how each and every penny is spent while attempting to reduce waste, accordingly.

Consider downsizing into a smaller home

Downsizing your home is an obvious solution to reduce expenses and save more during retirement, but keep in mind that not all downsizing is good downsizing. You’ll therefore want to dive into research to determine whether the cost to do so is worth the trouble (chances are that it is).

In doing so, you’ll first need to obtain a true valuation of your property with the help of a real estate agent or experienced independent appraiser who can provide a more accurate estimate than what is perhaps available online—after which you can explore smaller living options for an amount within your budget that will give you the means to save.

Reduce debt

Debt, for many retirees, is a constant source of stress. Likewise, carrying too much debt into retirement can place additional strain on a fixed income. If you fail to successfully manage your debt before you retire, you’ll likely need to cut back and adjust the budget you’ve become accustomed to over the years.

One of the smartest moves you can make debt-wise is to pay off your mortgage; as housing is the biggest monthly expense for retirees, you can enjoy some big savings if you do this in a speedy manner (noting that a recent Harvard Joint Center for Housing Studies report showed nearly half of homeowners aged 65-79 are still paying off a mortgage). The more quickly you can unload this debt, the faster you can put that money toward other important retirement expenses.

Continue working

It’s a no-brainer that the more you work, the more money you can stash away for retirement. What you may not realize is that those who keep working and delay claiming Social Security benefits—available as early as age 62—can enjoy an additional boost to their retirement savings as they’ll receive a higher benefit (about 7%) for every year they wait until reaching full retirement age (the age when you’re first entitled to a full SS benefit, currently 67 if you were born after 1959).

Seek out income-boosting opportunities

While this option may not sound appealing to all, a side gig is often beneficial in many ways. Financially speaking, just making and saving an extra $500 a month with a 5% return rate can lead to over $77,000 in savings within 10 years. Finding a side hustle you truly enjoy can also help fill your free time and give you a sense of purpose during your later years: factors imperative to a happy retirement.

Take advantage of catch-up contributions

Those over the age of 50 have the option to capitalize on catch-up contributions, an IRS provision that allows you to make additional contributions above standard limits to your 401(k), IRA, or other retirement accounts. As of 2024, you can contribute an additional $7,500 per year for your 401(k) and $1,000 for your IRA (or a total of $8,500 if you have both accounts).

Task your financial advisor with reviewing your tax returns

Those who don’t explore this option are potentially missing out on the opportunity to make the most of their hard-earned money. Why? Because there’s a good chance your financial advisor knows the nuances of your financial situation and investments better than your accountant.

For example, it might make sense to conduct a Roth conversion (essentially converting money from an existing traditional IRA, SEP, or SIMPLE IRA into a Roth IRA) if you expect to occupy a lower tax bracket within the next few years. Tax-loss harvesting—the process of selling securities that lose value to potentially offset capital gains (profit made from selling an investment)—to reduce your overall tax burden is another example as well.

Ongoing collaboration between yourself, your accountant, and your financial advisor will help you get the most out of your money.

Consider a health savings account (HSA)

An HSA is a type of savings account you can use to pay for qualified out-of-pocket healthcare expenses, including deductibles and copays. One of the most appealing features of these accounts—specifically designed to help people with high-deductible health insurance plans (HDHPs) pay for such expenses (unlike a flexible spending account)—is that any money left over at the end of each year simply rolls over as a great way to save for future healthcare costs.

In sum: how late starters can boost their retirement savings

Just because you’ve put retirement savings on the backburner doesn’t mean you can’t plan for a brighter financial future. Hiring a financial advisor can help get you back on track!

Have questions? Schedule a FREE discovery call with one of our CFP® professionals today!

Retirement Savings Strategies for Procrastinators