7 retirement catch-up strategies for lifelong procrastinators

It's easy to put off saving for the future as you focus on more immediate needs. But it’s never too late to start saving for retirement. However, you’ll need a change of mentality to prioritize your long-term retirement needs over short-term wants. Here are seven strategies you can use to play catch-up with your retirement savings.

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7 retirement catch-up strategies for lifelong procrastinators

Save first, spend second. Most people spend what they earn not long after their paycheck is deposited in their bank account. Saving doesn’t happen until the end of the month if there is money left over. Often, there isn’t. To jump start your retirement savings, consider switching to a better tactic practiced by the wealthy. Save your money before or soon after the money reaches your bank account.

A 401(k) plan is the easiest way to begin building a nest egg for retirement. If your employer doesn't provide a 401(k) plan, you can set up automated transfers from your bank account into your traditional or Roth IRA. Set these up so that the money comes out the day after you're paid so you won’t be tempted to spend it before you save.

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Catch-up contributions. The IRS allows workers who are age 50 or older to make catch-up contributions to retirement accounts. These are bonus contributions above the standard limits for everyone else. Older workers are eligible to contribute an additional $6,000 to a 401(k), 403(b), or 457, an extra $1,000 to a Roth or traditional IRA and $3,000 more to a SIMPLE IRA or SIMPLE 401(k).

Decrease monthly expenditures. The fastest way to find some extra cash to save for retirement is to reduce your spending and consumption. If you don’t have one, create a budget and track all your expenditures for a few months to understand where your money goes. Identify where you are overspending and cut out the unnecessary cash outflows. These two steps can be enlightening to first-time budgeters.

If you are approaching retirement age without any savings, you may need to make bigger sacrifices to catch up. As you analyze your new budget, consider each spending line item in the context of your long-term retirement needs.

Downsize or relocate before retirement. The most effective way to decrease your living expenditures is to change where you live. By moving regions or downsizing your home, you can drastically lower your cost of living. Doing this before retirement has a two-fold impact. First, it allows you to save more approaching retirement. Second, you’ll have more manageable housing costs when you enter retirement, requiring less savings. But not everybody can pick up and move. Keep your housing expenses in check early on and be sure to make it part of your comprehensive retirement plan.

Earn side income. If you have the capacity to work outside of your full-time job, consider starting a side business to earn additional money. Side income doesn’t have to be large to make a significant impact on your monthly cash flow. The extra income will free up money for contributions to your 401(k) or other tax-advantaged accounts.

Start by identifying activities and hobbies that you do for enjoyment. Then explore ways to monetize your interests when you have free time outside of your nine-to-five job. If you’re lost for ideas, browse the internet or social media sites for advice on ways to earn extra money. You may be able to find an online course in the niche you’re considering and emulate others who have turned an interest or hobby into income. Don’t be discouraged by a crowded marketplace. Your unique background and perspective can attract an audience or population of buyers to consume whatever it is you’re providing.

Change employment. The Census Bureau estimates that 79 percent of U.S. workers have access to a 401(k) or other defined contribution plan, according to W-2 data. If you are one of the workers without access to an employer-sponsored retirement savings plan, consider switching to a job that provides one. Tax-advantaged plans such as traditional 401(k)s and IRAs have the dual benefit of lowering your taxable income and providing tax-deferred investment growth. These are crucial components of a retirement plan. Having an employer-sponsored plan makes it easy and automatic to invest, and they often include an employer match. The lack of easy access to investment vehicles is one factor holding back many procrastinating retirement savers.

Create cash flow. An analysis of your overall financial situation may identify opportunities to create additional cash flow through smart financial maneuvering. The most powerful of these maneuvers is a mortgage refinance. Refinancing your mortgage to a lower interest rate is a way to reduce your monthly expenses without a substantial change in your lifestyle. These work best when your current rate is higher than available rates and after years of paying down principal. If you intend to stay in your home, you can extend the term of your loan, which lowers your payment. Better yet, shorten the term of your mortgage and pay it off sooner.

Paying off or refinancing debt of any kind can unleash cash flow in your budget. Car payments don’t have to be the norm. Pay it off, or use cash to purchase your next vehicle. Eliminate or consolidate high interest credit card debt and vow to never spend beyond your means again.

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Craig Stephens is a blogger at Retire Before Dad.

Copyright 2017 U.S. News & World Report

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