How to catch up on retirement savings
Your 3 step guide to saving enough for retirement
08:12 07 December 2014
If you are aged 50 or more and you think that your retirement savings are insufficient to guarantee you a comfortable living during retirement, then you should be looking forward to increase your contributions towards your retirement plan. The following are principles on how to realize meaningful catch up retirement savings.
The 25 Times Principle
You are in good shape to retire if your savings are roughly more than 25 times the amount you would need to withdraw from your retirement account in the first year of retirement. Consider making adjustments if your savings are smallish. Switch to a no nonsense saving mode and consider postponing retirement.
Make a Nest egg for Health
During early retirement, retirees are generally active and can make great investment projects and other retirement objectives such as travel. During late retirement however, a lot of money will be needed to cater for health. Whenever you are depositing your monies, think about health costs in later retirement years and add them into your savings for retirement.
Consider depositing monies into your health care savings account if you have one and let the monies accumulate in interests over the years so that you would have plenty when you retire.
The Minus Ten Principle
The minus ten principle states that you should start to make retirement savings your age minus ten percentage of your income. That is to say, if you start your retirement savings plan at 30, put aside 20% of your income. Similarly, if you start your retirement savings plan at 40, save 30% of your income and so forth.
It is a challenge when you start late but it makes for comfortable living in retirement. Strive to save a bigger percentage by cutting down on costs you don’t really have to incur. Analyse your situation and decide whether you really need the car or whether cable television is such a priority. Make a cut in expenditure anywhere you can and put that in your savings.