As a general rule, it's a good idea to close out your career with about 10 times your ending salary socked away in an IRA or 401(k) plan. This means that if you're in your 60s earning $80,000 a year, you'd want about $800,000 in your nest egg before you retire.
But what if you're nowhere close? It could be that a series of surprise expenses got in the way of your retirement plan contributions, and now, you're not exactly thrilled with your balance.
If that's the case, don't panic -- there are ways you can compensate for a lower savings level. Here are a few to start with.
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1. Work longer
Working longer is a smart move when you're low on savings because it not only gives you an opportunity to pad your nest egg, but also allows you to leave your IRA or 401(k) alone a few more years. If you're unable to continue working full-time because health issues make that too difficult, talk to your employer about gradually phasing out some hours.
You might, for example, go from a typical 45-hour workweek to 35 hours, and then down to 25. That way, you're still earning a paycheck for a few extra years, albeit without the same level of strain.
2. Plan to delay Social Security as long as possible
You're entitled to your full monthly Social Security benefit based on your personal wage history once you reach full retirement age. But if you're willing to hold off on filing, you'll be rewarded in the form of a higher monthly benefit. In fact, for each year you delay your filing past full retirement age, your benefits will increase by 8%. This means that if you're entitled to $1,600 a month at a full retirement age of 67, but you wait three years to sign up, you'll end up getting $1,984 a month instead -- for life.
Keep in mind that you can only delay your Social Security filing until age 70. Beyond then, there's no point in holding off on your claim.
3. Set the stage for part-time work as a senior
A steady paycheck during retirement could easily help compensate for limited savings. As you near the end of your career, think about the ways you can carve out some earnings as a senior.
If you're in the professional-services field, you can try networking with different contacts to build up a client base for eventual consulting work. If you're in a creative field, you can do the same, or start networking with professionals who can offer tips on how to pick up more gig work.
You can also look at starting your own business during retirement that has nothing to do with the work you did while you were employed full-time. If you love cooking and have always wanted to try your luck as a caterer, do it -- even if you've spent the past 40 years crunching numbers as an accountant. The key is to set yourself up for some added income so your nest egg and Social Security benefits aren't tapped out.
Approaching retirement with little savings isn't a great situation to be in, but it's also a fairly common one. Use these tips to bail yourself out of that situation -- and enjoy your senior years to the fullest.
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Low on Retirement Savings? Here's What You Need to Do - The Motley Fool
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