Whether you’re nearing retirement age or still have several years left in the workplace, there are strategies you can implement to bridge the gap and secure a comfortable retirement.
Naturally, you need to know how far behind you may be!
This means the first step in addressing a retirement savings shortfall is to assess your current financial situation comprehensively.
Take stock of your retirement accounts, including pension plans such as your Pillar 1, 2 and 3, and any other investment vehicles you may have.
Calculate your total savings balance and compare it to your retirement goals to determine the extent of the shortfall.
Additionally, evaluate your current expenses and budget to identify areas where you can cut costs and redirect funds towards retirement savings.
Great, you’ve completed the first step. Now what?
Read below to find out the steps you can take to increase your chances of enjoying a comfortable and enjoyable retirement!
Delaying retirement can be a strategic move that involves extending your working years.
Essentially, this provides you more years to earn income, contribute to your retirement accounts and grow your investments.
Delaying retirement can also increase your State / Social benefits, too, as they are often calculated based upon your earnings history and the age at which you begin to receive them. For each year your State pension is deferred, you will likely find that the benefits you receive could increase by a certain percentage each year.
In parallel to having more years to earn income, you also reduce the number of years you will need to rely on your retirement savings! Thus, you have extra opportunities to pay off debts, such as mortgages or loans, and reinforce your financial situation.
However, whilst this may not be the ideal scenario for everyone, it can be a practical solution for those looking to boost their retirement savings over the long-term.
Exploring additional income sources can be highly effective in bridging the gap caused by a retirement savings shortfall.
This could involve taking on part-time employment, freelancing, or starting a business you can do in addition to your full-time job to generate supplemental income.
By diversifying your income streams, you can increase your overall cash flow and allocate additional funds towards your retirement savings. This in turn can provide a sense of financial security and peace of mind, knowing that you have alternative avenues to support your retirement lifestyle.
When faced with a retirement savings shortfall, it’s crucial to reassess your retirement goals and expectations.
This involves carefully evaluating your desired retirement lifestyle, including factors such as travel plans, hobbies, healthcare needs, and living arrangements.
This method would include reducing the income you take and your planned expenditure (as listed above).
By undertaking this review, you can identify areas where adjustments may be necessary to align with your ‘financial reality’.
Options like downsizing or relocating can be an integral part of alleviating financial strain.
Downsizing involves reducing the size or cost of your current living arrangements, whether by moving to a smaller home, selling excess possessions, or cutting down on unnecessary expenses in this area.
By downsizing, you can free up funds that can be redirected towards bolstering your retirement savings or covering essential expenses.
Relocating to a more affordable area is another strategy to consider as moving to a region with a lower cost of living can stretch your retirement savings further, allowing you to maintain a comfortable lifestyle without depleting your resources too quickly.
Researching potential relocation destinations and assessing factors such as housing affordability, healthcare access, and overall quality of life can help you make an informed decision about whether relocating is a viable solution for your retirement savings shortfall.
Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice.