Catch Up Strategies for the Rest of Us Thumbnail

During my 20’s it was easy to live in the present, only ever thinking of retirement as being a far-off fuzzy “what if” scenario. Colleagues in their 40’s would caution me to start planning for this distant event before it was too late. However, I didn’t take their sage-advice and somehow thought my path would be different, i.e. I’d win the lottery or be swept off my feet by a millionaire. But guess what? I’m now pushing 40 myself and that “far away future” seems to be creeping up on me at light speed.

Yet just because I didn’t plan my retirement early in my career doesn’t mean I’m doomed to eating cat food and pushing around a shopping cart to my card board box home. What it does mean is I need efficient strategies to help me catch-up and get on track to a stress-free retirement, and I need to start NOW.

Getting Back to the Basics

Thankfully I’ve always been budget conscious and track my spending using a software program. I’m then able to use past information to gauge future spending; meaning I can take a year’s worth of expenses and predict where my money will most likely be spent each month. Using my monthly budget as a guide, I can cut down on the luxuries and get back to the basics or necessities; one necessity that I’ve been avoiding is saving for retirement.

Without completing depriving myself of all of life’s indulgences, I can minimize expenses in certain categories, like say Starbucks, and apply the remaining amounts to my retirement fund. Since small expenses can add up quickly, finding an extra $100 – $200 a month will be a small gold mine that I can reserve for my future.

Maximizing all the Avenues

This is the year I get serious about my future and open a 403 (b), the equivalent of a 401 (k). In the beginning, I will only be able to contribute about 5-7% of my salary. However, within the next 3-5 years, my goal is a lofty 15-20% of my income. As my income presumably increases and, restraining myself from life style inflation, I should be able to take the additional income and apply it toward my retirement.

Another option I’m investigating is mutual funds. Not wanting to stick all of my eggs in one basket, so to speak, I don’t feel entirely comfortable relying on one account to support my golden years. Mutual funds would allow me a little diversity.  Setting up automatic deposits of 3% of my income to begin with also minimizes the cost of opening a mutual fund. Some companies, like USAA, waive minimum deposit amounts altogether with auto debits. One benefit, or downfall depending on how I look at it, is there isn’t a fee associated with withdrawing funds, though any withdrawal is taxable.

I know a lot of people prefer IRA’s as a supplement to their traditional retirement account. However, I’m in an unusual position when it comes to the popular ROTH IRA – my husband and I don’t file our taxes jointly and there are some limitations and exceptions when it comes to opening a ROTH. For now, a mutual fund seems easier to start.

Alternative’s to Retirement

Of course there are always alternatives to retirement such as prolonging my retirement age. For some, this might be an excruciating option, but in my case I actually enjoy what I do so extending my job a few more years is a viable option, as long as my patience doesn’t wear thin (working with young children requires the patience of Job), or cutting back to half-time for a few years . Not only would it mean contributing to my retirement funds a little longer, it would also mean I’d receive a little more from social security and my teacher’s pension plan.

Another possible alternative could be a drastic lifestyle change; now or in the future. Drastic as in moving to a city that’s one-third the cost of the current one I live in. Or, changing my lifestyle to a more simplistic one; canceling my land line phones, moving into a lower cost housing structure, selling most of my material possessions, going car-free – all possible options if need be.

The beauty of planning retirement earlier in one’s career is to maximize the benefits of compound interest and to ride out the economy’s valleys and peaks. Though I still have some time on my side, there’s no better time than NOW to begin my path towards a brighter and more hopeful retirement.

Readers, have you always been focused on retirement since you started working?  Do you have any catch up strategies or suggestions if you are a late starter?