Working a second, part-time job is a common way to pay down
credit card debt or address unexpected bills. But today some
middle-age savers are taking a second job for a different reason:
to help boost lackluster retirement accounts.
"I see that more and more," says Mike Sena, a certified
financial planner in Canton, GA. Sena has multiple clients who are
putting the money from a second job into their retirement account
because they feel they haven't saved enough to this point.
"For many people, retirement is still ages away and they say,
'I'll have time to take care of it,'" Sena says. But his clients
with second jobs are opting to play catch-up in their 40s and 50s
in hopes of not having to
work past their retirement age
.
David Bakke, 45, began working part-time at a restaurant nine
months ago with a straightforward savings goal: $500,000 for
retirement. Bakke makes $48,000 in his full-time job in the
financial services sector, and earns about $1,000 a month after
taxes from his restaurant job, which he invests in a mutual
fund.
He also contributes 7 percent of his salary to a 401(k) plan and
opened a
Roth IRA
five years ago. He tries to max out his annual contributions to
both accounts.
"Working a side job is important to me because my previous level
of contributions to my retirement savings would have left me short
when I reached retirement age," Bakke says. "I used to simply set
aside what I could for my retirement savings and hope that I would
have enough money. However, after investigating my situation, I've
realized that such an approach was not viable."
Last year he saved $12,000 for retirement. His goal this year is
$20,000, which he expects to reach with his current contributions
to the Roth, 401(k) and mutual fund. Without the extra job, he
calculates that he'd only have about 65 percent of what he needed
to enjoy a "decent" retirement.
A divorced father of a 5-year-old son, Bakke says that taking on
another job caused other areas of his life to suffer at first, as
he was able to spend with less time with his son and almost no time
with friends. But he says he's since learned new time-management
techniques that give him more free time, which
he's written about
as a contributor to the site MoneyCrashers.com.
Before retiring, Sena recommends to his clients that they have
no consumer debt. He also suggests that they set aside 10 to 15
percent of their income for retirement annually before they
consider paying down their mortgage or funding their children's
college tuition.
While many retirement savers may be behind on their goals, only
a fraction will have the work ethic needed to take on a second job
to make up the gap. But for Bakke and others, the peace of mind
that comes with a healthy nest egg is enough to make the extra
hours worth it.