Let’s face it: If you haven’t saved enough for retirement, there’s no magic bullet that will stack your accounts with cash. But there are steps you can take to improve your financial situation—if you’re willing to put in the effort.
With the help of Sean Fox, co-president of Freedom Debt Relief, a leader in the credit advocacy and debt resolution industry, we provide a “rescue and recovery” plan for seniors who have not adequately prepared for the financial realities of retirement.
Prioritize Debt Reduction and Elimination
As you prepare for retirement, it’s important to create a clear action plan to reduce and eliminate debt. Fox recommends paying down debt in the following order:
- Pay the minimum on secured debt. This is a loan that’s secured by a tangible asset, such as a home or car. Secured debt gets top priority because if you don’t pay the bill on time, you could lose the asset.
- Pay any student loan debt. This debt never goes away—even in bankruptcy, it can’t be discharged, warns Fox.
- Pay down credit card and other unsecured debt. “At today’s rates, paying off credit card debt effectively produces a 15 to 20 percent return,” says Fox.
If you’re struggling to pay off debt on your own, consider debt consolidation, credit counseling, or debt negotiation. These services can help you get your debt under control and put yourself in a better position for retirement.
Commit to Simple Savings Strategies
If your retirement account is looking leaner than you’d like, try Fox’s savings strategies so you can afford bigger contributions:
- Include a line item for savings in your budget. “The older you are, the higher the portion of your income you need to save if you are trying to catch up,” explains Fox. “The often-standard advice to save 10 to 15 percent of income no longer applies.”
- Make savings automatic. If possible, have your employer deposit your checks into your savings account. Otherwise, set up automatic withdrawals from your checking account to your savings account—before you can get your hands on the cash.
- Save any windfalls. “Make a promise that, if and when you receive extra money (from unexpected overtime, a gift, or even activities such as a yard sale), you will save that money,” advises Fox.
Make Lifestyle Changes
Of course, simple strategies can only get you so far. To shore up your retirement savings, Fox recommends taking a careful look at your lifestyle and committing to changes such as these:
- Cut unnecessary costs. Can you switch from expensive on-the-go coffee to cheaper coffee at home, or even free coffee at work? The question may be cliché, but this is just the sort of disciplined act that can help you increase your retirement savings, says Fox.
- Live on a retirement budget. You may not be retired yet, but living on your anticipated post-retirement income now (about 85 percent of your current income) can give you a good sense of your future financial situation.
- Consider moving. You don’t have to move across the country to find a more affordable home, says Fox. “Many seniors are able to generate a substantial profit on selling their home and moving to a nearby suburb, or simply to a smaller place.”
Find a Side Hustle
Finally, if you need to save more, you might simply have to make more. Consider these part-time positions to boost your retirement savings:
- Driving. If you enjoy time behind the wheel, contact your local school district, area colleges, van services, delivery companies, Uber, or Lyft to secure a part-time job.
- Tutoring or substitute teaching. If you are proficient in a specific area, bring your skills back to the academic arena. In some schools, you might not even need an education degree to teach.
- House- and pet-sitting. “The market for these positions is booming, both locally and globally,” says Fox. “Dog-walking and pet care services are also in demand.”
You may not be able to recover decades of missed retirement savings in just a few years. But with strategy, effort, and discipline, you can make significant progress toward your financial goals.
WEIGH IN: How are you preparing for the financial realities of retirement?