Tips to Maximize Your Savings Near Retirement

Anxiety about retirement is a common theme for Americans. The AARP reports that, as retirement gets closer and comes into focus, 55% of Generation X believe that they will not be financially ready for retirement. This anxiety has many root causes, so it’s important to assess what kinds of financial obstacles create it and how best to address them. Through a calm, reasoned approach, it’s possible to establish the savings and financial conditions your family needs for a comfortable retirement.

Common Obstacles to Retirement Savings During Your Career

Market conditions can have an outsized impact on your retirement savings. Many IRAs and 401(k) programs rely heavily on investments in stocks and mutual funds that rise and fall with business cycles. Even conservatively managed funds can risk losses in value if the generalized market conditions are bearish enough.

Aside from generalized market conditions, there are significant personal events that can impact your ability to save. Even the biggest tech companies, such as Amazon and Google, laid off more than 100,000 workers in 2022, according to CNBC. Despite Amazon’s record profits during the COVID-19 pandemic, layoffs like these aren’t uncommon in tech and other industries.

Even in the circumstances that you can keep your job, significant events such as surprise medical expenses and family members in need may cause you to dig into those savings. As anxiety-inducing as it may be to see the numbers go down in these situations, it’s not the end of the story.

How to Maximize Your Savings Near Retirement

The closer you get to retirement, the more stable and secure you typically want your investments to be. Paradoxically, it may seem that taking big risks with high-yield stocks can help you “catch up” on lost time or money, but CEPR has found that in both the European and American markets, there are stable stocks that withstand crisis situations.

Of course, retirement advisors suggest maximizing your savings from the beginning of your career. Nevertheless, for most people, having a perfect track record of savings and leaving your accounts untouched during your working life may not be possible. Research from the Bureau of Labor Statistics highlights the significant impact that early retirement contributions have on your long-term financial wellbeing. Even if you can hold on to just some of these early savings, you’ll potentially be much better off by the time you retire.

The same math that encourages you to save early also encourages you to continue saving. Say you put money away at 45 and let it sit for 20 years before retirement. Then you’re able to hold off for another 10 years before digging into that part of your savings. You’ve still built up 30 years of interest on that investment despite it being closer to retirement than to the point when you started your career.

Following that logic, savings in your 50s and 60s can also play a big role in your financial health. The IRS even has programs to support this, as US News reports that sizable catch-up contributions for retirement programs are available to workers aged 50 and older. While it’s true that you’ll miss out on earlier interest and returns, you can still put away money to maximize the tax benefits during the time in your career when you may be earning more than ever.

You can also be proactive in terms of your lifestyle. If you’re concerned that your savings won’t last for as long as you need with a certain standard of living, consider what alternatives are available. Many Americans choose to downsize their homes, reaping profit from a fully or mostly paid-off mortgage. The liquid cash from such a sale can pay for a much smaller home or cover living expenses in a modest apartment or community living center without the need for digging into retirement accounts.

Further, investments in a second home or rental property during the latter half of your career can give you more comfort. Rent prices historically rise with inflation and often exceed the consumer price index, which led to the highest average rent prices ever in 2022, according to NPR. While managing a rental property still requires work, it’s often less effort than working a full-time job and can even be delegated to a property management company for a fee.

Ultimately, the key to maximizing your savings near retirement is to preserve what you’ve already saved, take advantage of catch-up programs, modify your lifestyle, and rely on stable investments that will be there for years to come. If you observe these strategies, then you may find yourself in a comfortable retirement.