As older workers approach retirement age, their lack of preparation for retirement is becoming more of a challenge. “The typical American only has around $57,000 saved for retirement,” wrote Michael Douglass for the Motley Fool. And while many workers who are age 50 plan to work to a median age of 67, according to the Transamerica Center for Retirement Studies, 60 percent of current retirees ended up leaving their jobs sooner than planned, Douglass wrote.
What can those hurtling toward retirement do to better prepare? Here are four tactics:
Start Socking Away Money
Workers should know whether or not they can live off 4 percent of their savings during the first year of retirement. “If the numbers don’t look favorable, consider upping your retirement contributions by socking money away in a traditional or Roth IRA,” Douglass wrote. Those who are age 50 and older “can take advantage of the catch-up contribution and put away $6,500 a year.”
According to Employee Benefit News, those who are self-employed should also take advantage of contributing to a SEP IRA. “For example, 50-year-old workers who received $100,000 in self-employment income can contribute as much as $20,000 to the account for 2016,” stated in the story.
Weigh Social Security Options
Many Americans file for Social Security at age 62. “You can boost your annual Social Security income by about 8 percent a year for each year you delay taking Social Security between 62 and 70,” Douglass wrote. That can add up quickly, especially for those who don’t have robust savings of their own.
Diversify Job Training
Being proactive can prolong employees’ careers and even create opportunities for part-time work after retiring from their main jobs. “Now might be a great time to take advantage of job cross-training opportunities that could either help forestall a possible buyout later,” Douglass wrote, “or give [workers] marketable skills to use that do a slower, working transition to retirement.”
Seek Tax Advantages
According to Employee Benefit News, older Americans can look for ways to reduce their tax bills to help increase their savings. “Taxpayers who are 65 and older would be better off with an itemized deduction instead of a standard deduction if they paid Medicare insurance premiums and incurred hefty health care expenses last year.”
They should also make sure to look for loopholes related to taxes and retirement savings. “Although taxpayers can no longer make tax deductible contributions to their workplace retirement plan for 2016, they still have time until April 17 to sock away as much as $5,500 (or $6,500 for those aged 50 and older) in a traditional IRA,” according to Employee Benefit News. “This entitles them to a saver’s credit that can raise their tax refund while taking advantage of tax deferral on the contributions.”