It’s Not Too Late
Are you one of those in your 50s with little or no retirement plan to speak of? If that’s the case, it’s nothing to be ashamed of just yet, as according to Transamerica Center For Retirement Studies (by way of Forbes), 42% of those surveyed expect their standard of living to decline after they retire.
This doesn’t have to be you, though. It may be late in the game, but it’s not too late. You can still improve your retirement outlook drastically. It’s just a matter of going about it the correct way.
Analyze Your Budget
Since you’re aware of your tardiness in regards to saving for retirement, chances are you’re wise enough to have a budget. However, before we go any further, a thorough look into expenses needs to take place.
According to Fidelity Research (by way of Bankrate), “Thirty-nine percent of current retirees say they underestimated their spending, and expenses increased in retirement rather than going down.” It’s crucial to make note of excess that can be trimmed. The earlier you catch savings opportunities, the better.
It should also go without saying, that it will be wise to erase your debts prior to saving for retirement.
People in their 50s who earn $60k to $80k a year have a median 401(k) balance of just a bit under $170k, according to the latest Employee Benefit Research Institute report (by way of Forbes). To put it simply, this doesn’t hit the desired targets for this age range.
By this point, your 401(k) should be five to seven times that of your yearly salary. To put yourself in a better position to do this, you’ll need to load up your 401(k). If you can contribute 20% of your income, do it. Beyond just your 401(k), look into IRA options, and do the equivalent. At 50 or older you have the advantage of catch-up contributions, too, so there really should be no excuses.
If you cannot pull this off, or even a more modest 15% of your income, there are a few things you will need to consider doing.
Consider a Secondary Income
If you’re having trouble contributing to your 401(k) in a significant way, then you’ve got big problems today, let alone the ones that wait for you in retirement. You may want to consider a supplementary income source.
This doesn’t necessarily mean applying to the local McDonalds. Find a way to earn income while pursuing a passion. Perhaps working at a bookstore part-time, or in a record shop if you’re into music, will keep things interesting.
Whatever you so desire, as long as this income is applied directly to your savings effort, then you will benefit greatly from the experience.
Cover The Bases
Aside from preparing for retirement by dumping as much as possible into your 401(k) and IRA accounts, you should also be paying mind to house payments and your health coverage.
In regards to the house payments, it would be wise to make extra principal payments now while your income is at its apex, in order to eliminate payments before retirement. If you know you will not be able to pay it off in time, look into refinancing.
As far as your health coverage is concerned, see if you are eligible for a health savings account. Fund it as much as you can afford. The money you don’t spend rolls year over year. An HSA provides a safety net for the health issues that may crop up in retirement.
Retirement might be right around the corner, but if you keep your eye on the future, without neglecting the present, then you will be well on your way to a safe and comfortable retirement lifestyle.
The next few years may prove to be a bit tougher, but keep your focus on the fact your current sacrifice is for your future. Thinking this way, it can help you actually reap happiness and security in retirement.