If you're in your 40s or 50s and you haven't started thinking about how you will actually achieve your retirement and what you'll do when you stop working, then it's time to get serious.

Here are five major reasons people are forced to keep working far longer than they ever expected. Read on to see how to fix these issues and increase your chances of retiring on time.

1. Underestimating how much money you'll need

senior asian couple shocked at bank paperwork

It's hard to guess how much money you need to save to retire comfortably, but it's probably more than you realize. Generally, you'll want to cover 70% to 90% of your working income with a combination of your savings and Social Security.

So, someone who makes $60,000 will need $42,000 to $54,000 each year of their retirement. Is that less or more than you thought?

Either way, the Economic Policy Institute has found that the median retirement savings for Americans between ages 56 and 61 is just $17,000. In fact: more than 40% of baby boomers approaching retirement don't have any savings at all.

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Solution: Accelerate your savings

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If you're behind on your savings, you should still be able to retire on time if you increase how much you're saving during your last 10 years of work.

You can even accomplish this without entirely devastating your current plans and lifestyle. How? Enter the certificate of deposit, or CD.

A CD is like an accelerated savings account. Essentially, you deposit a sum of money for the bank to hold for a fixed term of anywhere from one to five years. You can't access the money before the end of the term without incurring a penalty, unless you specifically choose a CD that has no penalty.

But during its time sitting in the bank, your money can gain twice as much interest every year than if you'd put it in a high-interest saving account.

CDs are considerably lower risk than investing in stocks or mutual funds, and are ideally suited for shorter-term savings goals.

2. High living expenses

young couple pushing a convertible on the beach

Many people have difficulty saving for their retirement because their cost of living is too high and they don't have much left over after paying bills.

Some picture themselves getting by with the small amount they've saved in their tax-free retirement savings accounts because they plan on transitioning to a thrifty lifestyle once they retire. Unfortunately, this assumption has two flaws that will lead to an inability to retire on time.

First, not putting money aside now is just postponing the fact that you must put money aside. If you don't do it now, you'll have to do it later. That will almost certainly mean having to work past your projected retirement age.

Second, it's harder to give up an expensive lifestyle with a big house and nice car than you might imagine. If you reach retirement age and realize you want to keep these luxuries, you'll have to keep working to save extra for a more comfortable retirement.

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Solution: Cut your lifestyle spending

piggy bank on the beach
Billion Photos/Shutterstock

So, what's the solution? Simple: begin to gradually decrease your lifestyle spending ahead of time.

Look at how much you make a month. Driving the newest car can be expensive, and so are cable TV, premium mobile phone plans, and eating dinner out several times a week.

If you begin to cut down on your monthly spending, you'll have more money left over to put into your savings account, a CD, or another investment that will get you to your savings goal faster.

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3. Overspending on housing

a large suburban house

Apartment living is very common in Europe and other parts of the world, but it doesn't really jibe with the white-picket-fenced American Dream. If you're living in North America and you own a house, there's a good chance it's bigger or more expensive than you need.

A report from the Joint Center for Housing Studies at Harvard found the number of Americans who can't afford their homes jumped 146% from 2001 to 2017.

The problem begins during house shopping, when people fall in love with a house and then start pulling strings to see how they can pay for it. They fail to use a mortgage calculator to determine how much house they can afford.

Unfortunately, this results in mortgage and maintenance costs that eat up too much of the family budget to have any left over for retirement savings or investing.

Solution: Downsize

large couch in a small room
Robert Kneschke/Shutterstock

If having a bigger house than you need is making it impossible to save money for retirement, then consider downsizing in the years before you stop working.

This will allow you to put more of your income towards your retirement and increase the chances that you will be able to retire on time. Downsizing earlier will also make your transition to budget-friendly retirement living easier.

Finally, keep in mind that the city where you choose to retire can make a big difference in the quality of life you can achieve with your savings and Social Security.

4. Investing too aggressively or not at all

side profile angry driver

The search for bigger returns leads many people to invest heavily in stocks, which yield higher returns than savings but are riskier thanks to market volatility.

Aside from running the risk of losing your money, successfully investing in stocks works best as a long-term strategy. The best options are growth stocks and income stocks, or mutual funds or exchange-traded funds that pay regular, increasing dividends over time.

This means if you don't have 20 years to pursue investing in stocks, you might be running a higher risk and you won't be making as much money.

The flip side of risky investing plans is not investing at all because you're afraid of the risk. The result is that you'll short-change yourself and make far less money than you need.

Solution: Get higher returns on your money

man hugging a large bag of money

Putting your money in a certificate of deposit is a good middle ground that gets you higher returns than regular or high-interest savings accounts while avoiding most of the risk that comes with investing. When you lock your money down for one to five years in a CD, you're locking into a particular interest rate.

The risk is that if interest rates go up, the interest on your money won't — because you've locked in.

To reduce this risk, you can consider putting your money in a one-year certificate of deposit that will lock in the interest rate but won't force you to stick to it for too long if interest rates do go up.

The next year you could simply put your money in another one-year CD and reap the benefits of higher interest all over again.

5. Not having a plan

portrait of confused woman

Many people choose an age that seems best to retire and leave their “retirement plan” at that.

However, if you don't create a solid plan for your retirement, you may find yourself a year or two away from it and you won't be ready.

You may not have enough saved or you might not have thought about what you'll be doing with all your free time!

Solution: Create a retirement plan

senior couple using a laptop at home

A retirement plan should begin with how much money you think you'll need each month to cover housing, food, and other monthly costs that will ensure a comfortable lifestyle.

Cross-check this with your sources of income, including your Social Security, savings, and perhaps part-time work in retirement.

If there's a gap between how much money you'll have each month, then you'll need to fill it by padding out your retirement savings and possibly working a few years longer than you originally planned.

It won't be the end of the world if you have to work a few extra years before you retire, but it's best to make the most of it. The less time you have until retirement, the more important it is to gain the highest returns possible on your money, including from CDs.

Speaking with a financial planner can also help you get a better picture of what your retirement plan may be. Financial planners can look at your entire financial picture for both short and long term and assist in developing an investment strategy to supplement retirement income.

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About the Author

Esther Trattner

Esther Trattner

Freelance Contributor

Esther was formerly a freelance contributor to MoneyWise.

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