If I was behind on retirement savings, this would be my game plan

The sooner you start investing for your retirement, the more likely you will end up with a big nest egg. Unfortunately, not everyone can start saving money when they are young, as there are often many urgent expenses to cover.

If you’ve fallen behind when it comes to saving for retirement, you don’t have to give up hope of financial security in your later years. There are many ways to catch up. To help you save your retirement, three retirement experts from Motley Fool share their solutions if they were behind in their savings efforts.

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Make sure I invest aggressively enough

Katie Brockman: If I were falling behind on my retirement savings, one of the first steps I would take would be to check my asset allocation and make sure I am investing enough.

Your asset allocation refers to how your investments are distributed within your portfolio. Most investors will have a mix of stocks and bonds in their portfolios, and the exact amount you invest in stocks versus bonds will determine how quickly your savings will grow.

While bonds tend to be less risky than stocks, they also show lower yields. The S&P 500 has historically achieved an average rate of return of around 10% per year, while bonds can only generate average returns of around 4% to 6% per year. While it doesn’t appear to be a significant difference, it can affect your long-term savings by hundreds of thousands of dollars.

To earn as much as possible on the stock market, it is wise to invest relatively aggressively. That doesn’t mean you should invest your savings in extremely risky stocks, of course. But that does mean that you should be allocating more of your portfolio to stocks than to bonds.

The exact amount you should invest in stocks will depend primarily on your age. A general rule of thumb is to subtract your current age from 110, and the result is the percentage of your portfolio that you should allocate to stocks. So if you’re 40, for example, you can invest around 70% of your portfolio in stocks and 30% in bonds. It also means that as you get older your wallet should gradually become more conservative.

Investing heavily in stocks can be intimidating, especially when the market is volatile. But remember that market downturns are only temporary, and when you have decades left to save for your retirement, chances are your investments will recover well before you need them. money.

Delay social security

Maurie backman: It’s easy to see why so many people fall behind in saving for retirement. When you’re younger, income is often monopolized by short-term goals like paying off debt or saving for a house. Then, in your 30s and 40s, it’s easy to run out of money for your IRA or 401 (k) plan when you’re struggling with mortgage payments and child care expenses.

If I was behind on saving, raising my contribution rate later in life might not get me far. So what I would try to do in this case is delay my Social Security declaration.

When you give up claiming social security beyond your full retirement age, your monthly benefits are increased. This, in turn, could compensate for a lack of savings.

For example, a person entitled to a monthly Social Security benefit of $ 1,500 at age 67 could increase that benefit to $ 1,860 by filing at age 70, which is the last age to get a boost in that direction. And to be clear, this boost would be permanent – you would get a higher monthly benefit throughout retirement.

While Social Security should not replace personal savings, if I was late in building my nest egg, I would aim to get as much money out of the program as possible. At the same time, however, I would also aim to put more money into my IRA or 401 (k) when opportunities arise.

Work a few more years

Christy Bieber: If I got behind on retirement savings, my main concern would be finding a way to make sure that the money I invested provided sufficient financial support for the remainder of my retirement. To achieve this goal, I would work a few more years.

By putting more years to work, I would be able to delay withdrawing my nest egg. My investments wouldn’t have to support me that long. This would allow me to choose a higher withdrawal rate, so that the limited amount I had invested would produce sufficient funds to cover the needs.

Working longer could also help for a few other important reasons. First of all, delaying retirement would make it easier to wait to file for social security, as my colleague suggested. I could also continue to contribute to my retirement investment accounts during the additional years that I am working. And, since older workers are eligible to make catch-up contributions to 401 (K) and IRA accounts, I hope I can make more tax-deductible contributions to boost my nest egg as much as possible.

By delaying my claim for Social Security benefits, waiting a few more years to retire, and making sure I have the right asset allocation, I hope I can end up with plenty of money to retire without financial worries. And these are all techniques that anyone can use if they are behind where they would like to be in terms of investing for the future.


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