If you’re in your early 50s and have next to nothing saved for retirement, you’re not alone. The Employee Benefit Research Institute found that more than a third of workers between the ages of 45 and 54 who responded, said they had less than $25,000 set aside for retirement, while more than a quarter of those 55 and older said they had less than that saved.
CNN’s recent story, “3 ways to recover from a late start on retirement planning,” says that your situation isn’t hopeless. You still have time to significantly improve your retirement prospects, if you begin taking serious steps now. Consider the three most important things you need to do:
- Start saving! You need to make a major course correction in your finances that will mean major lifestyle adjustments. If you do make the commitment to save, you can still put together a pretty sizeable nest egg in the later part of your career. Look at doing most of your saving in an employer-sponsored plan like a 401(k). It has tax advantages, generous contribution limits ($18,500 this year, plus a $6,000 catch-up contribution for people 50 and older) and makes saving easier by automatically transferring money from your paycheck to your account. If you don’t have access to a 401(k), you can start an IRA, which allows you to deposit $5,500 a year, plus an extra $1,000 for people 50 and older. The sooner you start and the more you put away, the better your odds of having a secure retirement.
- Keep working. In a recent study titled “The Power of Working Longer,” retirement researchers found that delaying retirement and continuing to work can be one of the most effective ways of raise your post-career standard of living—and can be better than increasing your savings rate. Staying in the workforce lets you delay claiming Social Security. You can then qualify for a bigger monthly Social Security check in the future. You’ll also have more years to save for retirement, and your nest egg has more time to grow before you use it.
- Stay flexible and resourceful. Based on how far behind you’ve fallen in your retirement planning efforts, you may not realistically be able to save enough or put in enough extra years in your job to make up for lost time. Therefore, you need to be creative with other ways to enhance your retirement security. You could find sources of extra income, aside from Social Security and your savings. If you’re a homeowner, you might downsize to a smaller home or take out a reverse mortgage. Part-time work may also be an option.
Reference: CNN (June 21, 2018) “3 ways to recover from a late start on retirement planning”