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
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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 didn't make saving for retirement a priority early in life, it's not too late to catch up. 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.
How to retire at 50 with no money? ›
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
What to do if I have no retirement savings? ›
If you determine you need more than Social Security income to meet your retirement needs, consider these options:
- Set a detailed budget to minimize expenses. ...
- Downsize your home. ...
- Continue working. ...
- Take advantage of tax-advantaged retirement plans. ...
- Open a traditional or Roth IRA.
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.
Is 55 too late to save for retirement? ›
If you're between 55 and 64, you still have time to boost your retirement savings. Start by increasing your 401(k) or other retirement plan contributions if you aren't already maxed out. Consider whether a bigger pension or a higher Social Security benefit is worth working a little longer.
Is it too late to save for retirement at 57? ›
It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.
Can I retire at 50 and collect Social Security? ›
You can receive Social Security retirement benefits as early as age 62. However, we'll reduce your benefit if you start receiving benefits before your full retirement age. For example, if you turn age 62 in 2024, your benefit would be about 30% lower than it would be at your full retirement age of 67.
How do I start financially at 50? ›
If you're rebooting your financial life at 50, here are some tips that can help.
- Begin with a Sound Budget. ...
- Build an Emergency Fund. ...
- Find Ways to Reduce Your Spending. ...
- Pay Down Your Debt. ...
- Maximize Free Money. ...
- Keep Up with Your Retirement Account. ...
- Make Catch-Up Contributions. ...
- Consider More Drastic Steps.
Now, most financial advisors recommend that you have between five and six times your annual income in a 401(k) account or other retirement savings account by age 50. With continued growth over the rest of your working career, this amount should generally let you have enough in savings to retire comfortably by age 65.
What age is too late to start saving for retirement? ›
It's never too early or too late to start saving for the future, so take the small step of saving and enjoy the giant leap of owning your retirement readiness. If you have any questions along the way, we're here to help: 888-652-8086.
If you are already running out of money in retirement, consider part-time work, reverse mortgages, or financial assistance from family members or government programs.
What percentage of retirees have no savings? ›
The share of retirees with no savings jumped from 30 percent to 37 percent. Earlier generations of retirees counted on Social Security and employer-funded pensions to deliver a steady income. Social Security has dwindled as an income source over the years, and pensions are in decline.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, 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.
What is a good monthly retirement income? ›
Average Monthly Retirement 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 the age 55 rule? ›
This is where the rule of 55 comes in. If you turn 55 (or older) during the calendar year you lose or leave your job, you can begin taking distributions from your 401(k) without paying the early withdrawal penalty. However, you must still pay taxes on your withdrawals.
Can you start saving for retirement at 50? ›
Most tax-deferred retirement accounts offer people who are 50 or older higher contribution limits. These include 401(k) plans, individual retirement accounts and the like. Contributions to these types of accounts grow faster when your earnings aren't getting taxed every year.
Is it ever too late to save for retirement? ›
We want you to hear us say this: It's never too late to get started saving for retirement. No matter how old you are or how much (or how little) you have saved so far, there's always something you can do. You can't change the past, but you can still change your future.
Is retiring at 50 realistic? ›
If you're fortunate enough to draw a large salary, you could afford to invest more modestly and still have enough wealth to retire by 50. If you don't have a high salary, you could use a more aggressive portfolio to help get you there.
What percent of people over 55 have no money saved for retirement? ›
If you're over 55 and have no nest egg, you're definitely not the only one with some catching up to do. Almost half (48%) of U.S. households headed by someone 55 or older have no retirement savings, according to U.S. Government Accountability Office's most recent estimates.
