If you are experiencing a late start to saving for retirement, then there are certain options and strategies that can be employed to maximize your saving potential until you are ready to retire. Although it has been advised to begin saving for retirement during your 20s after establishing a steady source of income, it is never too late to begin putting away money for retirement.
You should start your retirement savings as soon as you can, in order to minimize the financial loss involved with preparing for retirement later in life. Use following financial tips and tricks to save more money within a short period of time and make a profit off the savings you already have on hand. These tips and tricks are specifically created for Americans who are starting to save for retirement later than usual.
Downsize Your Current Expenses
The quickest way to begin saving as much as possible toward retirement is downsizing your current living situation. Cut costs in any areas possible, starting with unnecessary expenses such as entertainment, going to the movies and dining out. Next, focus on downsizing essential expenses such as housing and transportation.
For many Americans, housing costs are generally one of the largest fixed expenses. If possible, then consider transitioning from your current living situation to a smaller townhome or apartment that is more affordable. Even if your mortgage has been paid off for a bigger home, the costs of expenses such as repairs, maintenance, property taxes and utility bills such as electricity, gas and water are much more expensive in a large home. In many apartments or townhomes, a landlord is the one who pays for those expenses. Cutting housing costs allows for a greater amount to be saved from your income toward retirement each month.
Next, trading in a vehicle with higher monthly payments for a more cost-effective but reliable car with lower monthly payments can reduce financial pressure and allow you to save a larger amount for retirement savings.
Another option for saving for retirement late is delaying your years until retirement. For every year that you are making income from employment, you can save more money and become eligible for greater benefits in the long run. You can even work part-time and/or work fewer hours over a larger period of time in order to increase your time employed.
Keep in mind that if you collect Social Security benefits later than your full retirement age but before age 70, then you may be eligible to collect a larger benefit amount each month. A fixed percentage is applied to each of your Social Security payments. Find out your full retirement age through the Social Security Administration website. Learn more about when to apply for Social Security benefits to maximize your payment here.
Find New Sources of Income
Finding new sources of income beyond your regular job can allow you to make more money in order to save for retirement. Think creatively about ways to make extra income quickly. For example, if you own a reliable vehicle, then you could be an Uber or Lyft driver during your extra time in the week. If you own a house, apartment or any property with empty living space, then you can rent out the areas privately or through AirBnB. Renting privately as a landlord provides you with steady income over a fixed period of time. These examples of extra income sources can be utilized on your own time while making use of assets you already own.
Work for new sources of income in your free time, but be sure not to become burnt out from working too much. Remaining healthy and active is necessary for you to perform at your best level each day.
Avoid New Debt
In order to maximize your retirement savings potential later in life, do not accrue any unnecessary debt and be sure to pay off existing debts as soon as possible. Increasing your debt amount causes hidden fees, inflation, late fees and monthly expenses to add up over time. Furthermore, the more money you need to use toward paying off debts means you will have less money available to put in your retirement savings.
Paying off credit cards and other debts as soon as you are able to allow you to avoid rising interest rate costs on monthly bills. Live frugally and avoid the allure of purchasing unneeded luxuries, especially those you cannot pay all at once. Although it may seem attractive to buy items on credit, remember that this form of debt will catch up to you eventually. Avoiding this practice altogether helps create healthy spending habits where you only purchase truly necessary items.
Practice Smart Investing
Lastly, using smart investment practices is a great way to maximize the savings you already have on hand. Investing your money using relatively safe strategies could potentially make the funds grow over time. Generally, purchasing stocks and bonds through a mutual fund is a safe investment option. While stocks are used to create asset growth over time, bonds are used as a steady source of income. Making a larger amount of investments with bonds could create faster income returns because stocks are riskier and generally take longer to achieve asset growth.
Diversifying your forms of investments is a good way to create a varied portfolio with a number of different income sources. For example, placing all of your money into stocks is less reliable than investing in every reliable source available. Diversified investments reduce the risk of unsuccessful investments and minimize financial losses over time. Creating a varied portfolio of investments allows for a large selection of investment options. Overall, a balanced investment portfolio creates a lower amount of risk and a greater possibility of income gains.
Practice cautious and smart investing with your money, and do not invest impulsively and/or without forethought. Never put your available savings at risk for a chance investment. There are certain methods that can be used to predict market trends, outcomes and fluctuations. Use these methods to invest wisely and avoid risky investments. Avoid relying on salespeople who are mainly attempting to make a personal profit by selling you a stock or bond that may not create much of a return or any income at all. Be skeptical when investing and educate yourself on market trends in order to make the best financial decisions.