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9 Things You Can Do Now to Ensure a Better Retirement

Make up for a late start to prepare for retirement


If you’re worried that you may not be able to retire as soon as you’d like, may outlive your savings, or may not be able to retire at all, you’re not alone.

Forty-four percent of U.S. baby boomers are not confident that they’ll have enough money to live comfortably in retirement, according to an Associated Press-LifeGoesStrong.com poll conducted in 2011. More than half (57 percent) say they lost money during the recession that started in 2007, and 42 percent say they are delaying their retirement as a result.

The survey also found that the median retirement savings for all U.S. baby boomers total just $40,000, and that a quarter of us have no retirement savings at all. Among those who have put money aside for retirement, the median savings is $100,000, far less than most of us will need to retire at all, let alone comfortably.

That may be why so many baby boomers (67 percent) plan to work for pay even after they have retired from their current jobs and why more than a third (35 percent) say they will have to work during retirement just to make ends meet.

Yet, a comfortable retirement doesn’t have to remain out of reach. The following 9 tips will get you started:

Create an Accurate Spending Record
Start by writing down all of your purchases and expenses for an entire month—everything from your mortgage payment to your morning latte—and make a note of less frequent expenses such as insurance payments, professional dues and magazine subscriptions that occur annually, semi-annually, quarterly, or every other month. Before you can make changes that will improve your finances and increase your retirement savings, you need to know how you’re spending every dollar you earn.

Save and Invest More Money
Once you know where your money is going, start actively looking for ways to save more of your income. After you have at least three months’ worth of living expenses in savings, set up a relatively low-risk investment plan that will put your money to work and fits well with your retirement goals and the amount of time you have to achieve them.

Simplify Your Life
One way to expand your retirement fund while shrinking your stress level is to simplify your life. Start by getting rid of all the stuff you have that no longer fits your life—and don’t replace it with newer versions of the same useless stuff. For example, if you have closets stuffed full of clothes and shoes you rarely or never wear anymore, donate them. Instead, design a wardrobe that requires just a few pieces in one or two basic colors, which you can combine to make many different outfits.

Simplification only feels like sacrifice if you let it. Once you get into the spirit, chances are you’ll enjoy the challenge of seeing how simple you can make your life without feeling as though you’re giving up anything important. By simplifying your life, you can reduce your expenses and your stress, which will make it well worth the effort.

Reconsider Necessities
When you’re looking for ways to lower your costs and save money, take a second look at your recurring expenses and the things you consider necessities. Do you need both a mobile phone and a land line? Could you save money on food by eating at home more often, or cooking more meals from scratch rather than falling back on processed foods? Could you make do with fewer toiletries, less makeup, or less expensive shampoo and still feel well-groomed? How about spending less money at the bookstore and more time at the library? Even small savings add up quickly and can pay big dividends over time.

Check Your Garage for Possible Savings
If you’re a two-or-more-car family, consider scaling back to just one vehicle. On average, owning and operating an automobile will cost you anywhere from $500 to $1,000 a month, sometimes more, in car payments, insurance, gasoline, repairs and maintenance, and other expenses. Owning just one car may require a little extra work to coordinate schedules, but the savings are immediate and ongoing.

Drive Less, Walk More
If you live in a place with good public transportation, you may want to consider giving up cars altogether and relying instead on buses, subways and light-rail systems. According to a study by the American Public Transportation Association, families that use public transportation can reduce their household expenses by more than the average U.S. household spends on food every year.

Giving up a car and switching to public transportation also means you’ll be walking more, which will help you maintain your health. And for those few times when you really must have a vehicle, a car-sharing service such as Zipcar or the generosity of friends and family members may do the trick.

Redefine Luxury
Let’s face it, we all like to pamper ourselves now and then with something really special, whether it’s a trip to the spa, a pair of diamond earrings, or a European vacation. But luxury, like beauty, is in the eye of the beholder. You can redefine luxury, and indulge yourself more often, by learning to savor less expensive experiences and possessions that, with practice a little extra mindfulness, will reward you with the same fabulous feeling at a fraction of the cost.

Save What You Save
If you follow these recommendations, you will save money, in some cases hundreds or thousands of dollars each month. As a result, you may be tempted to start spending the money you’ve saved instead of, well, saving it. Don’t go there. That kind of short-term thinking is what got you to your current age without enough money for retirement. Figure out how much you’re saving every month by taking these actions, and then pay yourself first by depositing that amount in a savings or brokerage account before you shop or pay bills.

Seek Professional Help
Get a good financial advisor. If you could create an effective retirement plan without help, chances are you’d already have a nice nest egg and be looking forward to a comfortable retirement. If that doesn’t describe your current situation, then it’s time to seek advice from someone who can help you determine how much you need, set appropriate goals, and figure out how to get there—even if you’re starting late.

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