Personal Finance

How can I revive my retirement plan?

Unemployment has hammered many households since 2008. Many people have taken pay cuts, and nest eggs have been whittled down. Now it’s time to take stock and get your retirement plan back on track.

First, add up your retirement accounts, and get a retirement projection to calculate how much you need to save each year between now and retirement.

You can use software, such as Quicken Financial Planner. A web-based retirement calculator, such as Vanguard’s, can provide a rough estimate.

Second, evaluate options. When facing a retirement shortfall, the most advantageous change is to work longer. You won’t be withdrawing from your investment portfolio, and you’ll still be contributing to your retirement accounts.

The second step to consider is to lower expenses.

If you plan to spend $50,000 a year in retirement and can trim that to $45,000, the target lump sum you need drops substantially. It’s $5,000 for every year in retirement. If you retire at 65 and your life expectancy is 90, that’s 25 years of lower spending — compounded.

Or work part time or change to a fun fulltime career. You’ll earn less and might not save anything, but you’ll still delay withdrawals, letting your investments grow.

Third, get the best bang for your buck to reach your yearly saving target. Save enough to get your company pension’s matching dollars, if your company does that.

Next save in a Roth IRA, from which money can be taken out tax- and penalty-free if certain conditions are met. If you cannot use a Roth, save in a traditional IRA.

Have more to save? Add to the company pension up to the maximum allowed.