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By Christine Benz | 05-11-2012 01:00 PM

Better Ways to Catch Up on Retirement Savings

Tightening your belt sooner (50s versus 60s), pushing retirement contributions to 20% of salary, and working even a little longer can have a big impact on helping investors reach their in-retirement income goals, says T. Rowe's Christine Fahlund.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com.

Many Americans find themselves playing catch-up when it comes to saving for their own retirements.

Here to share some tips for doing that is Christine Fahlund, she is a senior financial planner with T. Rowe Price.

Christine, thank you so much for coming in.

Christine Fahlund: My pleasure.

Benz: You recently produced some research where you looked at what levers people can pull when they find themselves in this situation. They've run the numbers on what it will take for them to retire, the income they need, and they see that they will fall short if they stay on path with their current savings plan.

So, let's talk about the levers that people can pull when they find themselves in this situation. I think some people might be naturally inclined to just make their asset allocation really aggressive and hope that that will pick up the slack for them, but you think that there are some better ways to go about it.

Fahlund: Absolutely. Ironically, we do tend to think of the asset allocation first, and that can be, more generalized, somewhere between 40% and 60% in equities as you approach retirement, so that's really not the key.

The key is saving. So, if you're afraid that you're not going to achieve the goal that you want, then the first thing you should do is try to increase the amount you're saving, the percent of salary.

So a lot of people today are contributing around 10%. They really ought to be contributing 15%, and if they're behind, then definitely see if you can inch your way up to 20%, so that will make a big difference long term.

Benz: So savings rate, and you have also done some work on pushing retirement dates out further into the future--just how impactful that can be. So you pick up dollars on a couple of different fronts: You are deferring your Social Security receipt date, you are continuing to contribute to those retirement plans, and probably most importantly you are not dipping into your nest egg.

Fahlund: Those are all key points. Putting time on your side is the most important concept for folks who are in their 50s, for example, to realize and understand. Some who have just had their children go through college say, "Now it's our turn," and so they start to take those trips, perhaps a little prematurely.

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