10 Small Changes to Stay On Track With Your Retirement Goals

By John Csiszar, Tue, January 19, 2021

Planning for retirement is by necessity a game of projections. The idea is to save as much as you can and make prudent investments so that you can comfortably ride off into the sunset. However, if 2020 taught us anything, it’s that life is unpredictable and even the best-laid retirement plans can get tripped up by surprise circumstances.

If you suffered a loss of income, sold your investments at the market lows or just haven’t been doing enough to hit your retirement goals, you might need to make a few tweaks. The good news is there are plenty of ways to pump up your retirement savings, particularly if you’ve got a few years or longer until you actually retire. But even if you’re right at the door of your retirement, there are a few small changes you can make to boost your nest egg.

Take a look at these ways to maximize your retirement savings and see which ones may apply to your personal financial situation. Implementing even a few of these options can help you get your retirement plan back on track.


Bank Your Bonuses — Including Your Stimulus Check(s)

Whenever you receive “found” or “extra” money, it’s tempting to spend it immediately. Whether it’s getting a stimulus payment from the government, inheriting money from a relative or winning a scratch-off lottery ticket, it’s human nature to want to splurge on yourself with at least part of this money. However, if you’re looking to keep your retirement plan on track, this is an excellent opportunity to boost your savings with no real effort on your part. If you contribute this money to a tax-advantaged retirement plan like an IRA, you can not only boost your savings but potentially receive a tax break on your contribution as well.


Make Catch-Up Contributions

If you’re over age 50, you’re in a prime position to boost your retirement savings. In addition to the $6,000 you can contribute to an IRA, the IRS allows those over age 50 to put in an additional $1,000. If you participate in a 401(k) plan, your advantage is even greater. On top of the $19,500 that most people can contribute to a 401(k), those over age 50 can set aside a whopping $6,500 extra, bringing the total allowable contribution to $26,000. Let’s say you begin taking advantage of this catch-up provision from age 50 to age 60. Over those 10 years, you could pack in an extra $65,000 to your 401(k) plan.


Take Advantage of the Retirement Saver’s Credit

The Retirement Saver’s Credit is a little-used provision that grants you a credit for saving money in an IRA or employer-sponsored retirement account. Depending on your adjusted gross income, the amount of your credit can be either 10%, 20% or 50% of the amount that you contribute to a retirement account. This can be an incredible way to boost your savings. If you qualify at the highest rate, for example, a $6,000 contribution to an IRA — in and of itself a prudent financial move — can result in up to a $3,000 tax credit to boot.

For tax year 2020, if you’re married and filing jointly, you’ll need an AGI of $65,000 or less to qualify for any credit, and $39,000 or less to qualify for the maximum 50% credit.


Plan Out Your Social Security Payments

If you’re entitled to Social Security benefits, you can claim them as early as age 62. However, your benefits will be permanently reduced by up to 30%. If you absolutely need the money at age 62, you should claim and begin receiving your benefits. However, if you can wait until full retirement age, which is age 67 for those born after 1960, you’ll permanently receive your full benefit.

If you can wait until age 70, your benefits will increase further, by roughly 8% per year. That’s a great risk-free return on your money if you can afford to wait. Consult with a tax or financial advisor to determine what Social Security claiming strategy works best for you in conjunction with your other financial and retirement planning.


Don’t Invest Too Conservatively

You’ve likely heard the age-old investment wisdom that investors should get more conservative as they get older. For the most part, this is prudent advice. However, it’s entirely possible to get too conservative with your investments, even as you get older.

If you retire at age 60, for example, it’s entirely possible that you’ll have a retirement stretching 30 years or more. Over that long of a time frame, it makes sense to still dedicate a significant portion of your portfolio to equities. If you have your entire portfolio in U.S. Treasuries, for example, you likely won’t keep pace with inflation during your retirement years. An allocation to stocks can help make your nest egg last.


Pay Off High-Interest Debt

One of the ways to maximize your retirement savings is to eliminate any expenses that drain your cash flow. If you have any high-interest debt, like credit card debt, that’s likely the biggest assault on your cash flow that you have. Credit card interest is often in the high double digits, and if you don’t pay it off every month, that interest compounds. In relatively short order, your credit card debt could easily double.

Think of it this way — if your credit card carries a 15% interest rate, you’re effectively earning a 15% return on your money if you pay that debt off. That’s highly likely to be a better return than you could earn on any investment, and it’s a great way to cut your expenses heading into retirement.


Refinance Your Home, Your Car and Everything You Can


Paying off high-interest credit card debt should be more of a priority, but if you’ve got a home mortgage, an auto loan or other debt, you’ve likely got opportunities to save money there as well. Even though these types of loans typically have rates far below those of credit cards, you still might be paying a lot more than you should.

Over the past few years, market interest rates have gone down dramatically. If you’re paying 4% on your home mortgage, for example, you may be able to refinance that loan into under 3% given current conditions. The bottom line is that if you’ve got any loans that are more than a year or two old, you should check the refinancing rates to see if you can swap into a more inexpensive loan.


Keep a Side Gig, Even If Retired

For many, the promise of retirement is the dream of no longer having to work. But picking up a side gig after you retire can provide two major benefits. First, you’ll be earning additional money, which will make your retirement savings last longer. Second, if you choose a gig you enjoy, you won’t even feel like you’re working. You’ll keep your mind sharp and enjoy a fruitful retirement.

A side gig doesn’t have to be an all-consuming affair. If you put in just a few hours a week, you can likely pull in a few extra hundred dollars per month. Many side gigs only require access to a computer or a telephone, meaning you can work from home or from anywhere in the world, for that matter. This means you can enjoy your retirement lifestyle while still keeping your long-term retirement plan on track.


Consider Relocating

Many retirees locate to sunnier climes to enjoy their life after work. If you’re willing to move, choosing the right location can provide enormous long-term savings benefits. If you live in an expensive area of the country, moving to a cheaper city, town or state could provide a big boost to your retirement savings.

If you’ve got a large amount of passive or other retirement income, for example, moving from a high-tax state to a state with no state income taxes, like Florida, could provide hundreds or even thousands of dollars in annual savings. Similarly, selling your home in a high-value area and moving to a state with below-average housing costs could also result in a windfall.

Many companies these days operate using a subscription model. Under this model, you’re entitled to unlimited use of services in exchange for a monthly fee. Typically, these fees are relatively small, but they can easily add up to a large monthly expense. In your mind, you might feel like you’re only paying $5 or $10 per month, but if you subscribe to numerous streaming services, this can quickly add up.

For example, if you pay $4.99 per month for Apple TV+, $6.99 per month for Disney+, $17.99 for premium Netflix and $12.99 per month for Amazon Prime, you’re already up to about $43 per month just for these four services. That’s more than $500 per year. Add in your other recurring subscriptions, such as additional channel or cable services, and you might be spending over $1,000 per year. Trim your recurring costs to essential services only and you can help keep your retirement plan on track.


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