How to plan for retirement when you're ready for retirement

Retirement planning is best done decades in advance. If you're one of the many Americans who just started thinking about it in their 50s or 60s, don't panic. There are still options to help.

Torin Halsey/AP/File
Retiree Jerry Hallman talks about water quality and the Colorado River Municipal Water District in Big Spring, Texas on Tuesday, March 11, 2014.

Americans nearing retirement age are faced with challenges that can make saving for retirement doubly difficult. Though you ideally should've already accumulated most of your retirement assets by now, the majority of the middle-aged population have a significant retirement savings shortfall. In a survey conducted by the Board of Governors of the Federal Reserve System, 19% of respondents aged 54 to 64 reported not having any retirement savings at all.

Many people in this age bracket find themselves in this position due to providing support for others. This is the stage in life where it's common to have kids in college or aging parents that you have to care for — typical setbacks for this chapter of life. But your retirement fund doesn't have to suffer. Here's how to beef it up in time for retirement.

1. Simplify and Live Like a Retiree

Retirees often have simpler lifestyles — they drive older cars, shop less often, and typically don't pay rent because their homes are paid off. And if you're approaching retirement, you should think of adopting this simpler lifestyle, too. If you don't already own your home or vehicle outright, then it's time to seriously cut discretionary expenditures and focus on paying off your core assets. Your home is perhaps your most valuable asset and biggest expense, so pay it off as soon as possible. Then, pay-off large ticket items you will need in retirement, like automobiles. The money you save after these are fully paid should be put into retirement accounts.

Fortunately, simplifying gets easier as we age. Many of us naturally opt for a simpler lifestyle, anyhow. Some easy areas where you might simplify expenses in order to boost retirement savings include:

  • Limiting expensive vacations or frequent eating out.
  • Cutting gym memberships and cable or magazine subscriptions.
  • Driving less often and eliminating unneeded car insurance.
  • Avoiding the purchase of unnecessary electronics or other big-ticket items.
  • Cutting back on costly hobbies.

Remember, even a savings of $100–$200/month can make a significant impact on your retirement bottom line, so get frugal today in order to relax more comfortably into retirement.

2. Delay Retirement

Don't quit your day job, and wait an extra three to seven years before retiring. If you've already retired, consider going back to work and delaying Social Security benefits. The difference between retiring at age 65 instead of 70 can be hundreds of dollars per month in SSI savings and many thousands more in your retirement accounts. In fact, your yearly SSI benefits increase 8% for every year you delay retirement. Calculate the difference for yourself using the government's SSI benefits calculator.

Another way to boost retirement savings: Work while receiving partial SSI benefits (more on this below), allowing you to stash more cash away. In 2015, those 66 and over can earn up to $41, 880 per year without impacting SSI payments. Those under age 66 can earn a maximum of $15,720 while receiving SSI checks.

3. Make Catch-Up Contributions

Worried about a paltry retirement savings account? Individuals age 50 and over are entitled to make heartier catch-up contributions to their retirement accounts in order to more quickly bolster their savings. For IRAs, the 2015 catch-up limit is an additional $1,000 (for an annual total of $6,500), while 401K plan contributions are an additional $6,000 (total of $24,000). And don't forget to use bonuses, tax-returns, gifts, earned, and extra income to fund your accounts.

4. Purchase Income-Producing Assets

Common income-producing assets include stocks, bonds, CDs, and deferred annuities — but also side businesses or real estate. These investments can guarantee passive income in retirement, so setting these up now can help boost your cash flow during your golden years. (See also: Why Retirees Are Using Annuities Instead of Early Social Security)

Consider whether divesting some non income-producing assets in favor of income-producing ones is feasible in your situation. For example, could selling your extra vehicle enable you to put a down payment on a rental property? Or, do you own gold that could be put into income-producing stocks or bonds, instead? Finally, are there any side businesses which you can comfortably invest in for passive income?

Preparing for retirement as you're approaching retirement age (or already there) can seem a daunting task, but a little ingenuity and frugality goes a long way.

Note: The Social Security Administration recommends that if you are going to delay retirement benefits you should sign up for Medicare at age 65.

This article first appeared at Wise Bread.

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