NEW YORK (MainStreet) — It's hard to believe, but according to a recent report by Forbes, 68% of Americans aren't saving for retirement in an employee-sponsored plan. What's more 69% of Americans under the age of 30 and a full third of those between 30 and 49 have nothing put away for retirement. If retirement is looming and you have nothing saved up, you don't have a lot of options. Still, you have a few things that you can do if you have even a decade left before your last day on the job.
Eliminate Your Consumer Debt
"We're seeing a lot of people going into retirement with significant amounts of debt," says Gerri Detweiler, Credit.coms Director of Consumer Education. She notes that the lower one's expenses are in retirement, the further that money can go. So even if you have very modest retirement savings, getting rid of your consumer debt while you're still working can turn that savings into something you might be able to live off of.
"If you find yourself facing retirement with quite a bit of debt, you should make an appointment with a credit counselor who can help you to get a plan for getting out of debt," Detweiler says. In this manner, it's possible to get on a debt management plan where you can pay off your debts in three to five years. "That can make the difference between going into retirement with no debt or having a bankruptcy looming," she says.
Kevin Gallegos, vice president of Phoenix Operations with the Freedom Financial Network, agrees. "It's kind of foolhardy to start saving when you have credit cards at 25% APR," he says. "You're losing money. You need to start by clearing off your debt."
Family financial expert Ellie Kay notes that this means you also need to be very careful when it comes to loaning money or taking on new debts. "This is the time to downgrade so that you can pay your mortgage," she says. She urges people to have most of their mortgage paid off as they enter retirement, if not completely paid off. After all, it's just one less expense to worry about when you're no longer working.
Budget for Retirement
Detweiler also points out that a budget for your retirement is important long before you plan on leaving your job. "Trying to look at what you can live comfortably on in retirement will give you a better idea of what kind of gaps you have to make up," she says. Such a budget will provide you with a realistic picture of the kind of money you need to come up with between now and when you retire.
"Your budgeting needs to be realistic," says Gallegos. "You have to look at what you have in savings and think about how long you are going to be alive. How much money do you realistically need to live out of your life the way that you want to live it?" Gallegos also notes that there will be compromises when you start out saving for retirement later in life.
Start Saving As Soon as Possible
Kay puts it very directly: "The worst mistake you can do is nothing at all. If you've gotten to 55 and you have no savings for retirement, you need to change your habits. You need to start putting your money into a matching account and take advantage of catch up benefits that are available to you."
Gallegos notes that, at this point in your life, you're going to have to be very risk averse when it comes to retirement investing. "You're not going to be a day trader," he says. "That would be like putting your money on the roulette wheel. You need to consistently save and rely on your savings and self-discipline."
Your Home Might Provide Some Options
Finally, realize that your home might provide you with some options. "If you're 55 and you have no kids in the house and it's just you and your spouse, you might want to sell your home," Gallegos says. That's not just going to offer you some equity; it's also going to cut your cost of living. When you downsize your home, all your housing-related costs are going to go down with it.
Reverse mortgages are a viable option, says Gallegos, but ultimately cautions that with that vehicle "you're basically just guessing how long you're going to live." Kay says that reverse mortgages are "usually not the best option by and large. You have nothing to pass along. You're completely giving away any equity that you have. If you go that route, you have little to no options now."
The main point is that you need to start thinking seriously about how you're going to make retirement work for you. Especially for someone who doesn't want to have to work in their retirement, it's time to get really serious really quickly about saving your pennies and dimes.
Written by Nicholas Pell for MainStreet