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Behind on Retirement Savings? There’s Still Hope!

Have you let too many months or years slip by to be able to afford a comfortable retirement? This is the eighth installment of our yearlong series, One Year to a Better Retirement, where we discuss ways you can improve your retirement outlook. This month we’re focusing on those of you who are behind on your retirement savings.

No matter how hopeless you feel about building a retirement fund, there is still hope—as long as you take action now! Take a look at Jim and Betty, who are behind on retirement savings too. Learn how you can turn your retirement outlook around by following their example.

Jim and Betty – Your Average Late Starter
Jim and Betty are both 45 and have zero retirement savings. Together they make $63,000 a year and have $6,000 in debt and 10 years left on their mortgage. They also have two kids nearing college age.

Jim and Betty have a lot of challenges standing between them and a comfortable retirement. But all they need is a plan.

Step 1: Rein in Spending

There’s no time to waste, so Jim and Betty should use $3,000 of their savings to knock out half of their debt. That will leave them with a $1,000 starter emergency fund. Then, by living on a budget and cutting back on their expenses, they can pay off their remaining debt in just three months.

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Next, they need to pile up cash for a fully funded emergency fund of three to six months of expenses. If they remain gazelle intense, they’ll be debt-free with money in the bank within 12 months.

Step 2: Invest Wisely

This is the foundation Jim and Betty need to begin investing 15% of their income for retirement.

  • Jim invests 6% in his 401(k) in order to receive his employer match.
  • He also opens a Roth IRA so he can invest the entire 15% of his income.
  • Betty doesn’t have a 401(k), so she opens her own Roth IRA and invests 15% of her income.

In total, Jim and Betty are investing $787 each month. By age 65, they can build a nest egg worth between $475,000 and $688,000.

Step 3: Put Off Retirement for Two Years and Get Intense

Once the kids head to college, Jim and Betty will help pay toward the kids’ education while continuing to invest 15% of their income toward retirement.

However, by the time they’re 55, the mortgage is paid off and the kids are on their own. By funneling an extra $1,300 a month into their retirement accounts, they’ll add between $250,000 and $300,000 to their balances through the growth of their increased contributions.

Jim and Betty should also consider working a couple years longer so they can save more and delay using their nest egg. The result: By the time they retire at age 67, they could have between $927,000 and $1.3 million!

Now It’s Your Turn

Don’t let your regrets about delaying your retirement savings hold you back. Simply having a plan and following it will help relieve that sense of hopelessness you have about retirement.

Add another layer of confidence by consulting an investing professional to find out what kind of retirement you can expect based on your savings plan and goals. An experienced investing advisor will also show you how to make the most of the time and money you have by helping you choose better mutual fund investments.

You can find an experienced, trustworthy advisor through Dave’s nationwide network of investing Endorsed Local Providers. Find your ELP today.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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