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"In a perfect world, we would all begin saving [for retirement] from the time we receive our first paycheck,” says Nicole Gopoian Wirick, a certified financial planner (CFP) in Birmingham, Michigan. “But we know life isn't perfect, and sometimes a late start is unavoidable.”
And very common. A 2018 Federal Reserve report revealed that 25 percent of nonretired adults have no retirement savings or pension at all and that only 45 percent of nonretired adults over the age of 60 believe their retirement savings plan is on track.
If you're 50 or older and anxious about retirement, you can still build your stash — with the right moves. “It's never too late to develop a comprehensive financial plan that is aligned with your objectives,” Wirick says.
Consider this methodical approach recommended by financial planners across the country. You may want to consult a planner in your area for advice that's specific to your situation.
Refine your budget, set up automatic savings
First, to free up cash, review your budget and eliminate any excesses. Food, for example, is one area where many people overspend, says Nadine Marie Burns, a CFP in Ann Arbor, Michigan. “Making a meal plan could save over $100 per month on discarded or unused items.”
Next, calculate a realistic savings goal and how much you can save automatically on a regular basis, Wirick says. If that's overwhelming, focus on making small changes over time. “And plan on living a really long life, possibly into your 90s, and do your retirement income calculations accordingly,” says George Gagliardi, a CFP in Lexington, Massachusetts. You can't control how long you live, but the average 50-year-old male can expect to live for another 30 years, to 80, and the average 50-year-old female can expect to live another 33 years, to 83, according to the Social Security Administration.
Pay down debt
Got credit card debt? Pay it down as quickly as you can to free up more cash to save. Malcolm Ethridge, a CFP in Rockville, Maryland, also recommends creating a plan to pay off your mortgage by the time you retire. “Eliminating housing expenses reduces the amount of income you will need to replace on an annual basis,” he says. Also avoid future debt, says Natalie Pine, a CFP in College Station, Texas. “For example, if you have car debt, put the payments into an account for a new car even once it is paid off, so that eventually you can pay for a car in cash and overall pay less.”
Stay invested
If you have a nonretirement portfolio or if you're self-employed and administer your own retirement fund, be sure to set up automatic investments so you can take advantage of dollar-cost averaging. With regular investments, you'll buy more shares when stock prices are cheaper and fewer when they are expensive. More important, you won't have to remember to write a check each month.
You also need a mix of different types of investments — with at least 60 percent in stocks — that is aggressive enough to help you to reach your goal over time, says Sandra Adams, a CFP in Southfield, Michigan. But don't take so much risk that you're tempted to cash out when the market drops. “Jumping in and out of the market can cause huge setbacks in your plan, and if you are already starting late, you can't afford those setbacks,” she says.
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Starting to Save for Retirement at 50? Here's What to Do - AARP
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