Some people put off retirement savings until later in life thinking they'll max out their IRAs or 401(k) once they're at their peak earnings. But sometimes, waiting too long to focus on retirement savings can seriously backfire.
Data from Northwestern Mutual finds that the average baby boomer today has $120,300 saved for retirement. And part of the reason for that not-so-impressive balance may be that a lot of today's near-retirees put off savings and never really managed to catch up.
If you're getting close to retirement with a similar savings balance, you may want to do some strategic planning to avoid a financial crunch. The good news, though, is that you do have options.
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Working longer could do you a lot of good
A retirement plan balance of $120,300 might seem like a lot of money at first. But if you stick to the 4% rule, that only has you withdrawing about $4,800 a year. Even on top of a Social Security check, that's not a whole lot of money.
If you're approaching retirement with a lower savings balance, one smart thing to do is extend your career. Doing so could help your finances in several regards.
First, the longer you put off retirement, the longer you can keep your limited savings untapped. Also, working longer could make it possible to add to your savings, even if you're only able to do so to a modest degree.
Working a few more years past your initially planned retirement date could also make it possible to delay your Social Security claim. For each year you do past full retirement age, up until the age of 70, your monthly benefits get an 8% boost. And a more generous monthly payday from Social Security could help make up for a smaller income stream via savings.
Consider working part-time in retirement as well
Even if you've got a bit more than $120,300 saved for retirement, if you expect your nest egg to generate minimal income, then you may want to consider holding down a job in some capacity as a retiree. Even if you're only able to earn a few hundred dollars per month, that's money that doesn't have to come out of your IRA or 401(k). As a result, your savings might last a lot longer.
Plus, the nice thing about the gig economy is that it might offer up an opportunity to do work that you consider fun. If you love crafting, for example, you might get hired to create custom jewelry on an as-needed basis for a store in town.
Don't assume the worst
It's not a great thing to be approaching retirement with only $120,300 in savings. But that also doesn't mean you're doomed.
In addition to the moves above, adopting a frugal lifestyle could help you stretch your nest egg and get by comfortably on whatever Social Security pays you. So consider cost-cutting measures like downsizing your home and relocating to a less expensive part of the country if you have minimal savings and not a lot of time to catch up. The simple act of relocating and cutting your annual property tax bill from $4,000 to $2,000 could make a huge impact when you're looking at a nest egg that may not provide you with more than a few thousand dollars of income per year.
