Sometimes, it seems as though personal finance advice is all about what you should have done. But we’re all able to easily identify the mistakes we’ve made in the past. The important advice is what you should do to correct those old mistakes. Shoulda coulda woulda is singularly unhelpful in those situations.
This is particularly true when it comes to retirement savings. If you’ve already received your AARP card and still have not started putting money aside for your retirement, those charts showing how much compound interest will earn you if you start saving in your 20s are depressing at best.
But workers in that situation can’t afford to wallow in their “if only!” feelings, even though they might want to. Instead, they need to make a plan for the next 15 to 20 years:
1. Start putting money aside right this minute. It doesn’t matter if the amount of money you think you can afford to save is relatively low. Just putting some money into a retirement account is a step in the right direction. If your employer offers a 401k retirement plan, make sure you at least save enough to qualify for their matching contribution. It may not seem like much, but you’ll be very glad of the extra padding to your account once you start seriously thinking about retirement.
2. Downsize. If the amount that you are putting aside is not sufficient to keep you comfortable in retirement, then you need to start thinking of ways to cut your expenses so that you can add more to
your retirement savings. Can you sell your house and live someplace cheaper? Can you trade your car for something cheaper, or lose it altogether? Are you paying for memberships or subscriptions that you’re not using? Do you eat out several times a week? Be willing to slash your expenses to the bone. You couldn’t ask for a more worthy cause than taking care of yourself in retirement. (Here are some more advice on how to downsize.)
3. Maximize your investments. Enough people are in the same lack-of-retirement-planning boat that there are several provisions for those who are over 50. While younger workers can only contribute a set amount to their 401k and IRAs, savers who are over 50 may funnel as much as $5,000 more every year. Take advantage of these higher limits and reap the rewards when you’re ready to retire.
4. Plan on working longer. The difference between how much you have saved to retire at 65 and the amount needed if you wait until you’re 70 can be enormous. In some cases, it can mean that you have to give up less of your lifestyle in favor of savings. If you love your job, why not just plan on staying there longer so you’ll have a little breathing room? (Alternatively, you can look into these ways to earn more money so you can still quit and enjoy income.)
5. Get professional help. When it comes to retirement planning, it can feel awfully intimidating trying to navigate the options. This is particularly true for workers who haven’t started saving before age 50, since they would likely have worked on their retirement savings sometime earlier in their careers if they hadn’t found investments intimidating. If this describes you, find yourself a qualified and objective financial planner to help you sort out your investment options. The National Association of Personal Financial Advisors can help you locate someone you can trust with these important decisions.
Starting your retirement savings late is not ideal. But rather than lament what you could have done differently, be proactive now and stick with it. You’ll be so glad you did.
Tagged as: 401k, Retirement
Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.
They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.
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Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs.
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FAQs
If you need help saving for retirement, consider working with a financial advisor.
- Calculate Your Expected Retirement Spending. ...
- Fund Your 401(k) to the Max. ...
- Open an IRA Immediately and Fund It. ...
- Utilize Catch-Up Contributions. ...
- Calculate How Much You'll Receive From Social Security.
Many retirees with little to no savings rely solely on Social Security as their main source of income. You can claim Social Security benefits as early as age 62, but your benefit amount will depend on when you start filing for the benefit.
How much should the average 50 year old have saved for retirement? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
What is the best retirement plan for a 50 year old? ›
At age 50, you can start making extra contributions to your tax-sheltered retirement accounts (called catch-up contributions). Younger workers can only contribute $23,000 to their 401(k)s and $7,000 to their IRAs in 2024. But Americans aged 50 and up can contribute up to $30,500 in a 401(k) and up to $8,000 in an IRA.
How many 50 year olds have no savings? ›
More Americans, particularly those aged 50 and older, are growing concerned that they won't be able to make ends meet in retirement. A recent AARP survey confirms this concern by revealing that 1 in 4 people in this demographic have no retirement savings.
What is enough money to retire at 50? ›
So, if your income is $75,000 and you plan to retire at 50, aiming for a fund of about $2.25 million could be necessary (the math: 75,000 * 30 = 2,250,000), assuming you'll need 100% of your pre-retirement income annually.
What do poor people do for retirement? ›
Older adults with lower incomes have a number of financial options available to help in retirement. Programs such as Medicare, Social Security, food stamps, Medicaid, and Supplemental Security Income (SSI) are available to those who qualify.
What happens to people who dont save enough for retirement? ›
Retirees who haven't saved enough often need to downsize their homes or work longer than they planned. Your family might feel responsible for helping you if they see you're struggling with money in retirement. Retirement should be something you enjoy, but it's hard to do that if you're under financial stress.
What is the golden rule of retirement savings? ›
The golden rule of saving 15% of your pre-tax income for retirement serves as a starting point, but individual circ*mstances and factors must also be considered.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of April 2024, the average check is $1,776.73, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Many retirees fall far short of that amount, but their savings may be supplemented with other forms of income. According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
What is a good 401k balance at age 50? ›
Most financial experts suggest that retirees should have around five to six times their annual income saved up in their retirement account by age 50. If you haven't hit that mark, it's probably a good time to maximize catchup contributions and consider opening one or more additional retirement accounts.
How can I build wealth in my 50s? ›
How to build wealth in your 50s
- Building wealth in your 50s. ...
- Create or update your financial plan. ...
- Manage debt wisely. ...
- Maximise your super contributions. ...
- Review your super investments. ...
- Think about downsizing your home. ...
- Invest your bonuses. ...
- Partner with a financial advisor.
You should be using a retirement account of some sort to invest your money. Whether it's a 401(k), a 403(b), a traditional or Roth IRA or some other plan, having an investment vehicle to put away money is key. If you're really kicking up your savings at age 50, chances are you're decently close to retirement.
How can I catch up on retirement savings at 50? ›
If you're behind in your retirement savings, one great way to catch up is to contribute more to tax-advantaged plans.
- Contribute more to tax-advantaged retirement plans. ...
- Explore ways to cut spending. ...
- Consider working longer or more. ...
- Get serious with “extra” money. ...
- Evaluate Investment Fees.
Experts say even in your 50s, it's not too late to take steps to get in better financial shape. “While retirement is an exciting vision for a lot of people, the transition can be really stress-inducing,” said Keri Dogan, senior vice president of financial wellness and retirement income solutions at Fidelity.
How to start over at 50 with no money? ›
Here are some how to start over at fifty with no money tips:
Seek out a career coach. Think about attending a community college or online school for new skills. Consider starting a small business. Think about a side hustle for extra income.
What of households over 55 have $0 saved for retirement? ›
Among households age 55 and older, nearly one-third have no retirement savings or pension assets2.
