Nobody likes to think about their worst fears. But sometimes not conquering your fears is worse than the fears themselves.
For nearly half of Americans, that No. 1 fear is that they're not saving enough for retirement. A survey from financial institution Primerica found that 43% of Americans share that nightmare, while only 25% said their biggest fear is death.
Not saving enough for retirement can indeed become a nightmare. If you reach retirement age with little to nothing saved, you'll likely be forced to work until you can't work anymore. From there, you'll have to make do with whatever you do have saved, and when that runs out, you'll probably end up depending on Social Security benefits to make ends meet.
Bleak, right? Fortunately, the future doesn't have to look like that. The sooner you start saving for retirement, the easier it is to build a healthy nest egg. But even if you're behind on your savings, there's still time to sock away at least a little before retirement.
Getting started saving: The basics
Sometimes just getting started is the hardest part. Saving for retirement feels like a monumental task, which makes it easy to put off for another day. But the longer you put it off, the more you'll have to save every month to catch up.
If you're feeling overwhelmed by it all, break it down into more manageable chunks, and take it one step at a time. The first step, then, is to figure out how much you need to have saved for retirement -- or your retirement number.
The easiest way to determine your retirement number is to use a retirement calculator. Because each calculator uses slightly different inputs to calculate your number, it's a good idea to run your numbers through a few different calculators to see how the results compare. They may not be wildly different, but it will give you a range of results to choose from before you settle on a retirement number (and remember, it's always better to aim to save more than you think you need, so when in doubt, go with the highest number).
Once you have a goal in mind, you'll need to figure out how to get there. It may seem overwhelming to know that you have to save, say, $700,000 by retirement, but it's more manageable when you think about it as saving just $300 per month. Play around with a compound interest calculator to see what your savings would look like by saving different amounts each month. That will give you a smaller goal that's easier to work toward each month rather than blindly throwing money in your 401(k) trying to reach your retirement number.
Also, if your employer offers matching 401(k) contributions, that makes your job even easier. If you know you have to save, say, $300 per month, but your employer will match half of that, you don't need to work nearly as hard to save on your own.
What to do if you're falling behind
So you've figured out your retirement number and calculated how much you have to save each month to reach it. But what if that goal is still out of reach? If you're nearing retirement age with a next-to-empty retirement fund, you may need to save thousands of dollars each month if you want to reach your retirement number. For many people, that's simply not doable.
However, the worst thing you can do in this situation is to give up and do nothing. After all, saving a little is better than saving nothing, and if you're serious about beefing up your retirement fund, making a few lifestyle changes can help.
First, create a budget so you know exactly what you're spending each month. This is also an opportunity to see where you can make cuts. Trimming your expenses little by little can make a big difference, too -- even just $20 here and there adds up when you cut back in every spending category.
If simply cutting back where you can isn't enough, you may need to consider the idea of working longer. It's not ideal (especially considering there's always the chance that you could lose your job and be forced into an early retirement), but if you can, working just an extra couple years can significantly boost your total savings. Not only will you have more time to save, but the money you already have saved will have more time to grow (since you're continuing to add to your retirement account rather than withdrawing from it).
Another option is to hold off on claiming Social Security benefits. You're allowed to claim as early as age 62, but you won't receive the full amount you're entitled to each month unless you wait until your full retirement age -- which is between ages 66 and 67, depending on the year you were born. Then if you delay past that age (up until age 70), you'll receive a bonus on top of your full benefit amount.
For example, say your full retirement age is 67, and by claiming at that age, you'd be receiving $1,500 per month. If you claim your benefits at 62, they'd be cut by 30% -- and you'd end up with around $1,050 per month. However, if you wait until age 70 to claim, you'd receive a 24% bonus on top of your full amount, so you'd be receiving around $1,860 per month. If your personal savings are lacking, that extra money each month can go a long way.
Preparing for retirement isn't easy, but it doesn't have to be scary. As long as you take it step by step and break your big goal into smaller, easier-to-achieve goals, you'll be well on your way to enjoying your golden years in financial comfort.