You'll often hear that it's a good idea to kick off retirement with 10 to 12 times your ending salary in savings. The logic is that a sum that size should be enough to help you cover your bills on top of your Social Security benefits.
But what if retirement is rapidly approaching and you're nowhere close to hitting that milestone? If so, don't panic. While it may be disappointing to fall short on your savings goals, your senior years aren't necessarily ruined. But here are a few things you should do if you're facing a savings shortfall and don't have many years left in the workforce to compensate.
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1. Delay retirement a year or two
If your nest egg has nowhere near the amount of money you wanted it to have, delaying retirement by a year or two may only result in a modest boost to your IRA or 401(k) plan. But it's a boost worth going for nonetheless.
Say that by working an extra year, you're able to put another $5,000 into your savings. That $5,000 alone may not make a huge difference over what could be a 20-year retirement.
But by working another year, you're also creating a scenario where you'd holding off on tapping your existing savings and letting your money grow a bit longer. And that's not something to overlook.
Furthermore, if you work another year, it may give you a chance to delay your Social Security benefits and boost them in the process. For each year you hold off on filing for Social Security past full retirement age up until age 70, your benefits get an 8% boost -- for life. And that means you could set yourself up with a higher income stream by sticking out your job a bit longer.
2. Plan to work part-time
You may be looking forward to retirement because you're tired of working. But when you think about it, the thing you may be the most tired of is your specific job and the daily grind it results in.
If you're short on retirement savings, it does pay to pursue a part-time work opportunity once you leave your career behind. But the job you get doesn't have to be painful. You could find something you love to do and turn it into an income stream.
If you like animals, for example, you could offer up your services as a pet sitter. And if you're artistic, you can sell paintings and other works at craft fairs for money, or open your own online shop.
And if you're thinking "That doesn't count as a job," you'd be wrong. You're absolutely allowed to take a hobby and convert it to an income source.
3. Downsize your living space
Housing could end up being your largest expense in retirement. If you're not thrilled with what your savings look like, downsizing is a good bet.
Even if you're mortgage-free by retirement, downsizing could result in lower property taxes, homeowners insurance costs, maintenance, and utility bills. All of that could help stretch your limited savings. And if you do have a mortgage left on your home, downsizing could make it so you're able to sell that property, pay off that loan, and buy a new place outright without having to take on any debt in the process.
You may have had good intentions to ramp up your retirement savings, only to run out of time. If that's the case and you're now facing a shortfall, know that you do have options that don't include being miserable throughout your senior years due to a lack of cash.
