It’s Not Too Late to Save for Retirement After 50

If you’re nearing 50 or have already hit the big 5-0, retirement is no longer a distant dream. It’s crunch time and unless you plan on working until you kick the bucket, it’s time to get serious about saving for your financial future, especially if you think you haven’t saved enough.

Set a goal

Now’s the time to sit down and calculate how much you may need to have saved for retirement. While making this calculation, be sure not to set the bar too low.

First start with the amount of money you have saved in your investments and savings.

Next think through what type of lifestyle you’ll want during retirement, where you’ll want to live, and how much each of those things will cost you.

Set a goal based on those costs. If the number is too high, don’t be discouraged. There are many ways you can play catch-up. Worst case scenario, you’ll need to compromise on the items you want rather than need in retirement.

Consider the cost of retirement

Most people underestimate the cost of retirement thinking they’ll spend drastically less.

A general rule of thumb is to put away enough savings to match 70% of your current income. Remember though, the amount you’ll actually need depends on your lifestyle, spending habits, and personal circumstances.

Although the cost of commuting and eating lunches out are no longer items on your budget, you still have to pay for groceries, travel expenses, and last but not least, medical coverage.

Medical bills will be your largest expense and can deplete your savings significantly if you end up in a nursing home or need assisted living care.

Consider funding an HSA or look into long term care insurance to make sure you’re prepared for the cost of medical bills.

Talk to an expert

Perhaps the best way to know how much you should save, how to make the most out of your contributions, and whether you’re on the right track is to talk to an expert.

Talking with a professional about your goals will help you gain the confidence you need to have a secure retirement, no matter how late in the game you start.

Catch-up contributions are your friend

Now that you’re 50 or older you can contribute extra money to your retirement accounts.

As of 2015, you can contribute a maximum of $24,000 to a 401k account which is $6,000 more than those under the age of 50.

If you have an IRA, or would like to start one to catch-up, your maximum contribution limit is $6,500 as opposed to the $5,500 for younger workers. Saving this amount requires you to put aside approximately $542 per month.

The sooner you place money into your retirement accounts and take advantage of the catch-up limits, the more time you’ll have for your money to compound and grow.

Transition from risky to stable

When playing the catch-up game it may be tempting to place your money in more risky investments since they normally have a higher growth rate. However, the last thing you want to happen is to put the earnings you do have saved – for retirement – into a risky investment hoping to make up for lost time and then lose 20% of your principal.

Again this is something you’ll want to talk to an expert about to help guide you into more conservative investments.

Other ways to save

There are many other ways to make up for minimal savings.

For instance, you can always delay your retirement for a few years. It may not be your ideal situation, but it’ll give you a few more working years to make contributions to your retirement accounts.

Next you could downsize your lifestyle. Do you really need the spare bedroom, or the car your kid used to drive? Eliminating unnecessary expenses from your life means more money you can put towards retirement.

Lastly, you can get a second job before you retire to fund your retirement accounts. You can also work part-time during retirement if you have the financial need. Either way you’ll be adding income.

Save, save, save

Starting to save later is never an ideal situation and you may not have the retirement you dreamed about, but starting to save for retirement now will put you on track to a more secure financial future and hopefully a better retirement.

How do you plan to save for retirement after 50?