It can be discouraging, to say the least, to discover your savings are meager for retirement compared to that of your peers. That’s understandable, what with many financial advisors saying we should plan to have between $1 million and $2.5 million saved by the time we retire, says CNBC. Some, of course, need more to be able to keep up with the lifestyle they’ve become accustomed to. But it’s safe to say most of us will need at least a cool million.
So, what if you’re not even close to that amount? There are ways to play catch up, although you won’t see the returns you would have gotten had you started saving in earnest in your 20s. Here are some tips as you grow into your 60s.
- Get rid of debt. If you still have car loans, credit card debt, school loans, or personal loans, now is the time to get them down. You’re still collecting a paycheck and you have income to do so. Wait till retirement, and you’ll quickly get buried under an avalanche of payments. Start with the highest interest rates first and go to the next highest after that, and so on. This is sometimes referred to as a “debt avalanche.”
- Pay off your mortgage. If you haven’t done so already, make this a priority now. But it’s a reality that a third of people over the age of 65 still have mortgages. Tack on an extra two payments a year if you can to start to catch up. Re-finance if you’re paying more than 4.5 percent and go with a 10- to 15-year loan.
- Don’t assume social security will be there. If you approach this thinking you won’t have access to social security, you won’t miss it when you do become of age. However, chances are social security will still be there when you need it. That said, it’s wise to wait at least until age 70 to collect, as you can enjoy an eight percent increase in benefits for every year past your full retirement age that you put it off.
- Refinance over reverse. Many older homeowners can’t escape the marketers targeting them for reverse mortgages. It may sound like a great deal, but these types of mortgages are extremely complex and misleading, plusyou’re subjected to a lot of fees and the inability to access all of your equity. Also, interest rates can be up to 1.5 percentage points higher than you’d get through a refinance. With a refinance, at least you can get the most of your monthly payments while tapping into the most cash. If you refinance with a great rate for 30 years, you could conceivably save $500 a month.
Part of any solid retirement plan is to invest in stocks. You have to approach this wisely, as you will need that money in the next few years. Keep a stock fraud lawyer in your back pocket just in case.