Bruce lies awake at night worrying about his future.

He recently turned 50 and is taking stock of his life. He’s past the midpoint of his working career, he’s healthy, he has a happy marriage, and his teenage kids are doing great.

But he has one regret that keeps him from getting a good night’s sleep: He hasn’t been saving enough for retirement.

In and out of jobs for most of his working career, he hasn’t made saving for retirement a priority. Essentially living paycheck to paycheck, he’s let today’s expenses take precedence over saving for tomorrow. His 401(k) contributions have been minimal and inconsistent, he has no pension, and he’s invested next to nothing after working for almost 30 years.

Will Bruce ever be able to retire? Can he make up for lost time and catch up on saving so he can enjoy a comfortable retirement?

Find out how Jessica McBride, a senior financial advisor from Vanguard Personal Advisor Services, weighs in on this hypothetical situation. We also invite you to share your thoughts below.

Jessica’s advice       

Like other forms of anxiety, financial stress can eat away at you—as Bruce knows all too well. So it’s important to evaluate your situation and take steps to get on track.

When it comes to being behind with retirement savings, Bruce isn’t alone. According to a report by the Economic Policy Institute, the average retirement savings over a 25-year period (1989‒2013) was $124,831 for families ages 50‒55—far short of recommended levels.

Thankfully, it’s not too late for Bruce.

Here’s how he can correct course and route his retirement savings in the right direction.

1. Get on the same page

The first step would be to talk with his spouse. Discussing the situation could alleviate some of the stress Bruce is carrying around. Open communication can allow them to get on the same page and address it as a team. After all, it’s not just his retirement—it’s their retirement. They should be contributing to savings and reducing expenses together.

2. Make a plan

Before saving, Bruce and his wife must set a goal. They need to estimate what their nest egg should be and then work backward from there—calculating how much they need to save per month. They can use online tools to figure this out. But for a more accurate picture, a financial advisor can help estimate what they’ll need.

3. Reduce expenses & save

The next step is to cut spending. To do that, Bruce and his wife may need to change their lifestyle. That means eliminating unnecessary costs while reducing others. For example, they could stop eating out as often and cancel or downgrade their cable package. They could also consider downsizing a car or keeping the family car longer than they expected, to avoid bigger monthly payments.

If that’s not enough, they could consider forfeiting some college savings to help save for retirement. And when the kids are old enough to move out in a few years, they could downsize to a smaller home with lower utility bills, maintenance costs, and property taxes.

Wanting to save and actually doing it are 2 very different things. After coming up with their savings goal, Bruce and his wife should work together to make those necessary changes. If it will help steer them in the right direction, they can always ease into their plan to lessen the financial impact.

With fewer expenses, they should have more to contribute toward their goal.

4. Take advantage of catch-up contributions

The IRS recognizes that many people fall behind on retirement savings. That’s why the limit on employer plan contributions goes up starting at age 50. For example, in 2019 those younger than age 50 can save up to $19,000 in a 401(k). Those age 50 and older, like Bruce, get a bump up to $25,000 a year.

While maxing out contributions is a nice goal, it’s not something that can be achieved overnight. It’s going to take time. After a few years of cutting back on expenses, Bruce and his wife can look to increase savings and eventually max out their employer-sponsored plans and IRAs.

While saving more is a step in the right direction, saving over a longer time period might be even more beneficial.

5. Work longer

If Bruce’s savings isn’t adding up as quickly as he’d hoped, he can always stay on the job longer. In addition to continuing to earn money and contribute to his retirement fund, working longer also allows him to put off claiming Social Security. And the longer he waits, the more he’s entitled to.

For Bruce, full retirement age is 67, so each year he waits beyond that, he gets an increase of 8% plus a cost-of-living adjustment.

6. Increase stock allocation

If after all that Bruce and his wife are still short on savings, there’s 1 more step they can take—that is, if they can withstand more volatility in their portfolio. They can take on additional risk with their investments to help close the gap in a shorter amount of time.

Ultimately, how much Bruce and his wife need to save for retirement is a personal decision. It comes down to the lifestyle they want to lead.

Of course, if they’re still worried about saving enough for retirement, the best approach may be to hire an advisor. Getting an outside perspective on their situation might help alleviate some of their stress.

To learn more about Vanguard Personal Advisor Services, call 877-279-1709.



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