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No matter where you thought you
were on the road to retirement, chances are the
recent bear market has been a setback. But there are
steps you can take to get your retirement back on
track. Here are five catch-up strategies to
consider.
1.
Increase your savings rate.
If you’re a runner, a
swimmer, or a golfer, you know that it takes extra
effort to come from behind. Playing catch-up for
retirement takes the same effort. As the entire
nation becomes more focused on financial prudence,
take time to examine your own saving/spending
equation. Make it your goal to raise your savings
rate. Start with tax-advantaged accounts, such as
your workplace retirement savings account. But
don’t forget to contribute as much as you can each
year to an IRA. If you are over age 50 you can
contribute $6,000 to an IRA, including catch-up
contributions. Even a small increase in your savings
can make a difference.
2.
Invest with growth in mind.
A bear market may have bruised
your risk tolerance, but it’s important to keep in
mind that over the long term, both stocks and bonds
have generated returns that have exceeded inflation.
There is no guarantee that these investments will
continue to generate higher returns, but it’s nice
to know that history is on your side.
3.
Consider delaying retirement.
While the concept of early
retirement had great appeal during the prosperous
1980s and 1990s, the majority of working Americans
today expect to work to age 65 or beyond.1
Working longer can help your retirement income
prospects in two ways: You can use the extra working
years to help rebuild your savings and by working
longer, you reduce the number of years in retirement
over which you’ll need to stretch your savings.
And, if you use these extra working years to
significantly boost your savings rate, you may be
surprised at how much better off you could be in
retirement.
4. Work
part-time in retirement.
Another way to bridge the gap
between your current savings and your retirement
income needs is to continue to work part-time in
retirement. In fact, nearly three-quarters of
today’s workers expect to supplement their
retirement income with part-time pay.2
Your goal should be to use your part-time income to
keep withdrawals from tax-advantaged retirement
savings as low as possible until you are required to
take minimum required withdrawals at age 70½.
Part-time work is also a way to gain access to
employer-sponsored health care to help contain the
costs of health care in retirement — or to do
something you've always wanted to try.
5.
Maximize Social Security.
Most Americans claim early
retirement benefits at age 62. However, these
benefits are severely reduced compared to full
benefits paid between ages 65 and 67, depending on
when you were born. And if you delay benefits beyond
full retirement age, the annual amount you receive
continues to climb until age 70. It’s important to
take your personal health and family longevity into
consideration when you choose a date to commence
benefits — and to plan with your spouse, if you
are married. You may want to consider a split Social
Security strategy with the younger, lower income
earner claiming benefits early and the older, higher
income earner claiming benefits later. The reason?
If the younger spouse lives longer, he or she is
entitled to a higher lifetime benefit. Remember to
always work with your financial professional to
determine which strategy is best for you.
Rebuilding confidence
If you can implement one or
more of these steps in your retirement savings plan,
it can do more than help rebuild your assets: It can
help rebuild your confidence as well. Talk to your
financial professional about the strategies that
make sense for your personal situation — and a
plan that can put them into action.
1 2009 Retirement
Confidence Survey, Employee Benefit Research
Institute.
2 Pew Research Center.
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