What to do if you got a late start saving for retirement

Too Late for Retirement Planning?

by Rick Kahler


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Retirement Planning

Financial Independence. It's the time in our lives we retire from actively earning a living. For many of us, it's way out there in the future, something to plan for "someday." We're too busy with our lives, our families, and our careers to pay much attention to it.

In some cases, that inattention lasts until people are in their 50's or even 60's. All of a sudden it hits them that "someday" is getting closer fast and they aren't ready. They don't have anywhere near enough in savings and investments to provide a sufficient income when they are no longer earning.

If you're in this situation, it's time to get serious about planning for financial independence. But don't panic. Before you start pricing cat food at the grocery store and hinting to your kids about moving in with them, try these strategies first:

  1. Cut back now so you can be more comfortable later. Make saving and investing to become financially independent your primary goal. This means no new cars, no new toys, no expensive vacations, and no funding college educations for kids or grandkids. Take an inventory of your spending and then go over it together to find all the places you can cut expenses. Create a spending plan focused on freeing up funds to invest for your future.

  2. Consider downsizing now instead of later, but only if you can live more cheaply by doing so. If you can sell your house for, say, $250,000, buy something smaller for maybe $150,000, and invest the difference, this might a smart move. This works best if you have substantial equity in your house, meaning it is paid for or your mortgage is small.

  3. Get rid of debt. Stop using credit cards unless you pay the bill in full every month. Pay off credit card balances and any other personal debt.

  4. If you and your spouse are both working, pretend one of you loses your job and you have to live on one income, then put the second income toward saving and investing to become financially independent. A spouse who isn't employed might consider getting a job solely for saving and investing.

  5. Accept the reality that you're probably going to need to postpone retiring from work. If you enjoy your work, you might be happy to stay employed for a few more years. If you don't, look into possibilities for changing careers now. Or you might make plans for a second career after you retire from your current one.

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  7. Take an inventory of your assets. Include your savings accounts, investments, and retirement plans. Don't forget to include your Social Security income (yes, it will be there if you are over 55) and assets like a paid-for house or valuable personal property. Add in hobbies, skills, or interests that might bring in some part-time income. Also include intangible assets like health, family, and friends. These may not affect your finances directly, but they have a great deal to do with your well-being.

  8. Remember to enjoy the present. You may be cutting back on your spending, but don't discourage yourself by cutting back so much that life in the here and now is bleak. Find creative and inexpensive ways to stay involved in activities that are important to you and enjoy time with friends and family.

  9. Don't waste time and energy beating yourself up because you didn't start saving earlier. Instead, give yourself credit for what you are doing now. Remember, you aren't depriving or punishing yourself. You're investing in yourself in order to build a more comfortable future.

Rick Kahler

Rick Kahler, MSFP, ChFC, CFP, is a fee-only financial planner and author. Find more information at KahlerFinancial.com. Contact him at Rick@KahlerFinancial.com or 343-1400, ext. 111.

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