For most people, saving for retirement is a concern that’s constantly in the back of their minds. Even if you understand the importance of starting early, it’s not always easy to build a nest egg for the future. You might feel as if you don’t have the funds for it or may not know the first thing about making a plan.
According to Fidelity Investments, you should have saved at least eight times your income for retirement by the time your turn 60. This way, you know you’ll have the funds to support yourself once you’re out of the workforce.
However, Fidelity’s recommendation may not be possible for everybody. But that’s what it is — a recommendation. Instead of focusing on the figure, you should concentrate on the lesson that the experts at Fidelity offer, which is to start saving early and stay consistent.
“We came up with these as guidelines or goalposts for people to aim for,” Eliza Badeau, retirement expert and Fiedeltity’s VP of workplace thought leadership, told CNBC Select.
Although there are several good money moves you can make when you’re younger to bring you closer to your ultimate goal — such as automating your contributions and hitting the yearly limit — approaching 60 means it’s time to double down on your efforts.
These tips from CNBC Select can help you stay on track for retirement so you can enjoy your golden years to the fullest.
Monitor Your Credit Card Use
Credit card debt is problematic for people of every age, but it’s especially detrimental for older adults nearing retirement. Outstanding balances can put you at risk for a late retirement (if at all) or eat away at your fixed income once you leave the workforce.
Diahann Lassus, the co-founder, president, and CIO of Lassus Wherley, a wealth management company and subsidiary of Peapack-Gladstone Bank, told CNBC Select that older adults should pay off credit card debt before age 60.
She added that cardholders should exercise more caution now that online shopping is more prevalent during the coronavirus pandemic. “This movement to the internet is positive in many ways, but it can also be a negative,” Lassus explained, citing that online shopping can make it easier for people to spend money when they shouldn’t.
“This can increase impulse spending and that can drive up that credit card bill very quickly,” she notes.
The next time you find yourself shopping online for discretionary purchases, wait 24 hours before checking out. This gives you time to consider whether a purchase is necessary, Amanda Clayman, a financial therapist, explained.
And, as Lassus added, “Remember that the best way to increase your savings is to decrease your spending.”
Explore Your Passions
As you near retirement, you probably never want to think about working another day in your life. But this is an excellent opportunity to rediscover your hobbies and interests — and potentially supplement your income while doing it.
Ivory Johnson, the founder of Delancey Wealth Management and a certified financial planner, told CNBC Select that your 60s are the time to boost your income by earning money doing something you love.
“I have a client who is retiring next year as a scientist to become a gardener because she enjoys it,” he said.
Johnson also noted that near-retirees should consider life beyond a full-time job by attracting their own clients or specializing in a new skill.
“So, while they retire officially at 60, they may generate revenue from 60 to 65 without the stress of a career,” he continued. “For instance, I advised another client to go to culinary school because she likes to cook and needed to expand her social circle after the death of her husband.”
Pay Off Your Home Loan
When planning for retirement, paying off your home before retirement is crucial, Johnson said. Of course, a wide range of variables affects different homeowners’ abilities to do so. According to Kevin O’Leary, a Shark Tank investor, you should try to eliminate debt by age 45, but he recognizes that situations are different for everyone. No matter your circumstances, it would help if you determined how your mortgage works into your plans.
“The mortgage is a big deal,” Johnson remarked. “It’s usually 30% to 40% of a person’s spending, and, since the biggest fear of any retiree is running out of money, not having a mortgage means they’ll always have a roof over their head. That’s the emotional benefit to what’s largely considered a math problem.”
When you approach retirement, you could already have paid your mortgage off, or you might have a few more years to make payments. Lassis advises that homeowners review their budget and finances annually. This ensures you know where you stand relative to your goals. And there’s no better time to start than at the beginning of a new year.
“This is a great time to do just that as you begin to collect your tax information,” she explained.
- Gravier, Elizabeth. “Experts Say You Should Have 8 Times Your Income Saved by Age 60-Here Are 3 Money Moves to Help You Get There.” CNBC, CNBC, 29 Dec. 2020, www.cnbc.com/select/tips-for-saving-money-at-age-60/.