The prospect of retirement should be exciting. Maybe you've been working toward this goal since you took your first job and it's finally on the horizon. But what happens if you don't have enough money saved to retire?
You don't want to be stuck working forever, but do you have a choice if the investments in your portfolio aren't enough to support you? The good news is, there are things you can do if you are in this situation, but you need to act now. You need to explore your options, understand what you can do to make a positive impact to your financial situation, and focus on what you can control.
1. Change your retirement timeline. It might not be ideal, but you can still have the retirement you want if you're willing to work a little longer for it. Working an extra five years can have a massive impact on your nest egg. Since the last years of your career are also usually your highest-earning years, this could help you make the catch-up contributions you need to make your nest egg large enough to fund your retirement.
If the thought of five more years of your existing job is unbearable, consider how you could improve the situation. Could you reduce your hours? Request flex time? Work from home some (or all) days each week? Talk to your supervisor about your options, and get creative to make a few extra years feel a little less like work.
You don't necessarily need to work an extra decade or more, and you can still enjoy a long retirement after you give your nest egg a little boost. Plus, those extra years could help your retirement planning in other ways, like increasing your Social Security benefit, too.
2. Double down on your savings and reconsider your investment strategy. You can still retire when you want if you're willing to make the most of your final working years. Review your budget, and find places to tighten your belt so you can save more. Consider pursuing potential pay raises, job promotions or even working a few overtime hours to boost your income (and therefore, your savings). You could even land a side job, like driving for Uber, or find a way to utilize an idling asset.
Then, make the most of your savings by taking advantage of catch-up contributions in your retirement plans. People 50 and older are allowed to contribute $1,000 more per year to individual retirement accounts, up to $6,500. They can also contribute an extra $6,000, up to $24,500, toward 401(k) plans. The tax benefits of these plans will help close the gap to your goals more quickly.
In addition to simply trying to save more, take a moment to review your investments. You want to make sure you invest in such a way that you can take advantage of potential returns without taking too much risk. This is a tricky balance to strike, so consider talking to an experienced financial advisor who knows how to create appropriate portfolios for preretirees to help you get to the goals you want, not by working yourself to the bone, but by making sure your money is working as hard as it can for you.
3. Find ways to make money in retirement. Doing nothing in retirement probably sounds nice while you're working, but day after day of nothing is bad for your physical and mental health. Consider ways you can fill your time in retirement that could allow you to build a small income stream.
You could start the business you always wanted to pursue. You could monetize a hobby or just plan to work part-time in a position you enjoy. You could even put your considerable professional experience to work for a charitable organization. It's deeply rewarding and, if you are already retired, the low pay associated with charitable work is less of a concern.
Consider this: A part-time gig at the local country club could mean reduced greens fees or dining-room discounts and may actually be enjoyable work. Earning even a small amount of income in your retirement years means you don't have to rely 100 percent on your savings to fund your lifestyle, and that in turn means you may be able to retire with a little less in the bank.
4. Adjust your retirement lifestyle. Explore ways you can live well on less so you can still retire when you want. Living a little more frugally is absolutely worth it when you consider why you're doing it. Take time to identify where expenses may decrease in retirement, such as expenses you currently have for your children.
Then look for places in your budget where your spending is no longer in line with your needs or priorities. If you own a home, consider downsizing or moving to an area that has a lower cost of living. This will not only reduce your monthly expenses but could also let you take advantage of some of your home equity to bolster your savings (since you'll be able to invest some of the cash you received from the sale of your home). The less you need to be satisfied, the easier it will be to retire when you want.
5. Delay claiming Social Security. You may not want to work in retirement, but taking on a part-time job the first few years so you can delay claiming Social Security benefits could significantly boost the benefit you receive. Each year you delay claiming your benefit between age 62 and 70, your benefit increases by 7 percent to 8 percent. The Social Security formula also averages your 35 years of highest earnings, including zeros, to determine your monthly benefit.
If years spent out of the workforce in the past means you don't have 35 years of earnings history, those extra years of even part-time work could help increase your Social Security check, too. Social Security was never meant to be your sole source of income in retirement. But a check that is 15 percent higher from delaying just two years could make a huge difference.
The most effective way to close the gap between your current retirement savings and future needs is by taking advantage of a combination of the above options. It won't be easy, but if you make the most of your remaining working years, you can achieve the retirement of your dreams.
It isn't too late to make up for lost time, and you don't have to do it alone. Reach out to a financial planner who can provide a review of your financial situation, help you understand whether or not you're on track, and give you a specific plan of action to follow to secure the future you want.
(Editor's Note: This article originally appeared on Investopedia.com.)
— By Eric C. Jansen, founder, president and CIO at AspenCross Wealth Management