11/24/2013 08:03 am ET

5 Last-Minute Ways To Stash Retirement Cash


Time is your greatest ally when saving for retirement, but if you're behind the ball there are options. Learn how to build your nest egg quickly.

The key to lasting financial change is to keep spending in areas that mean the most and cut back in areas that are less crucial, says Stuart Ritter, a senior financial planner with T. Rowe Price investment services firm in Maryland.

"If the family vacations are what you view as the glue that holds your family together and you don't want to give those up and you'd rather drive an older car, that's the right decision for you," he says. "...What's important is you have to go through that prioritization process and you have to make some decisions."

  • Keep Working
    The simplest way to boost retirement savings is to hang onto your job. Staying employed for longer keeps your income and company benefits coming in and prevents you from dipping into your financial safety nets like retirement and Social Security benefits. One way to stay on the job is to redefine how you think of work says Ritter. "One of the things that we've started advocating is something we refer to as 'practiced retirement,'" Ritter says. "...Take the money that they were saving for retirement and start spending it. Go take that cruise...this idea of 'I stay in the workforce, but I also get to start playing' makes staying in the workforce a more palatable decision." If you're looking forward to bidding your job adieu too much, consider alternative work situations like moving to part-time, telecommuting or freelancing. Changing up where you do your job and how can drastically affect how long you're willing to stay employed.
  • Trade up your home
    Cashing in on home equity can free up some serious change, but before going that route, carefully consider how you're pulling funds out, says Gerald Wernette, director of retirement plan services consulting for Rehmann Financial wealth management firm. "One option is reverse mortgages," says Wernette. "...You're able to pull the equity out of your house. You've really got to scrutinize those, what is the internal embedded interest rate that you're being paid? What are the terms of that contract?" A better option might be downsizing your home by moving to a cheaper place and either selling or renting your previous abode. If you have extra space, you may be able to generate additional income without moving by renting part of your home through sites like or
  • Delay Social Security
    You can tap your Social Security benefits at age 62, but every year you wait increases your benefits, says Ritter. For example, a person earning $50,000 annually who takes their Social Security at age 62 would draw approximately $1,050 per month in benefits. A person just five years older with the same income would draw more than $500 more per month, according to the Social Security Administration's benefits calculator. "The biggest problem most people face is not that they run out of money three years after retirement; it's that they run out of money 23 years after retirement and they're still going to live another seven years," says Ritter. "...If you take [Social Security] later, you've made a decision that better manages the bigger risk that you face, which is running out of money before you've run out of life."
  • Tap life insurance
    "If you've got what's called a whole life, universal life or variable life, all those policies have internal cash value build-up," says Wernette. "...the cash value in that policy can basically be another one of the pots of money you can draw on for retirement." Permanent life insurance policies offer plan holders the ability to borrow against the cash value of the policy or withdraw their funds after a certain time period, but there are catches. Life insurance loans usually don't need to be paid back, but they do come with limits on the amount you can borrow and interest rates that can substantially reduce the policy's death benefit. Permanent policy holders can also access their policy's cash reserves by withdrawing premiums they've paid into the plan tax-free, but withdrawing interest collected on the policy counts as taxable income, according to the IRS, and you'll probably pay hefty surrender charges.
  • Evaluate your priorities
    One of the most effective ways to score immediate cash is to examine your spending habits, says Ritter. "There are two ways to approach this: There's the big-ticket approach and there's the daily lifestyle approach," he explains. "...If a large portion of your monthly income is going towards big-ticket items, [like if] housing costs are taking up 40 percent of your [income] or transportation is taking 25 percent, making coffee at home to save $3 a day is not going to solve the problem." Big-ticket spenders need to make changes where it matters, whether that's going from being a two-car family to one, downsizing your annual vacation, or reducing the amount you're spending to support adult children. People who are blowing their income on smaller money sucks like fancy cable TV packages or meals out can bank big by changing daily habits.

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