Conventional wisdom says that you should start saving for retirement early in life, ideally in your 20s when you start working your real job. But real jobs don’t always come in a person’s 20s and real life often steps in between, leaving plenty of people without any sort of retirement as they approach their 50s. If you’re in this predicament, you know how frustrating and frightening it can be. It’s also good to know that you’re fairly normal. About 20% of working adults don’t have anything saved for their retirement as they approach their 40s and 50s.
But according to TIME, it’s not only possible to start saving for retirement in your 50s, it’s possible to accumulate upwards of million dollars, depending on the route you take. It requires that you take on a different mindset and you apply some discipline. But with the right knowledge, you can have a sizable retirement nest egg. Here’s what you need to know.
First Things First…
Some tools, although meant to be helpful, can be a hindrance at first. That goes for the standard retirement calculator, according to Forbes. Since saving is primarily a mental exercise, at least initially, concentrating on what you don’t have or on the idea that you’re way behind in your savings will actually hinder you at first.
You need to be able to make some concrete plans for your retirement. This is difficult to do if your head isn’t clear. Focusing solely on the retirement calculator while you’re still trying to make retirement plans can be detrimental. You have many options available to you, including some “catch-up” options that allow those over 50 to contribute more to a company IRA than those who are in other age brackets – more on that to come.
Additionally, your financial situation requires you to take stock. Is there a place in your budget where you can cut back? Can you work longer than you expected? Is it possible for you to get a second job now that will help you add to your savings? It’s important to consider all these questions going into this process.
If you have an employer-matched IRA, now’s the time to take advantage of it. It is assumed that your IRA will make about 8% a year. To maximize this, you can contribute up to $24,000 a year (if you’re at least 50 years old). Or you can skip the catch-up provision and make a $5,500 a year contribution. The minimum you’d save by the age of 70 is $300,000 if you make no catch-up contribution. That’s not a bad chunk of change for 20 or so years of savings. Clearly, taking the catch-up option and working a few more years inches you closer to that million dollar mark.
Naturally, if you contribute more and save more, you’ll have more. Yes, taking advantage of the catch-up allowance will certainly help. But so will put more money away in your personal savings and cutting back on daily “treats,” like that trip to the local coffeehouse you take regularly. And as mentioned before, it is possible to work past the normal retirement age. People are living longer, which means that it’s entirely feasible for many people to keep working past retirement age.
The other thing to remember is that it’s good to think outside the box when it comes to retirement. Most people think they’ll be retiring right where they’re at. However, many retirees nowadays don’t spend their retirement years in the U.S. at all. Instead, they opt to retire in a less expensive place, like Mexico or Belize, where their dollars will stretch farther. The cost of living in some of the places that attract American expat retirees can be as much as 50% less than it is in the U.S. If your monthly budget in the U.S. requires you to have an income of $4,000 a month, living in a country that only costs $2,000 basically doubles your money.
See also: How digital nomads live a life of adventure and get out of debt faster.
Don’t Go It Alone
Part of the issue with many people is that they try to plan for their retirement on their own, without outside help. This is a mistake, according to Bankrate.com. It’s good to work with a financial advisor. If your place of employment offers this as a part of your IRA/ 401K, take advantage of it.
A person who works in this capacity day in and day out knows what kinds of options you have and can advise you concerning this matter. He/ she can help you make decisions that are not only based on your situation but also on your temperament. The constant worry about your retirement may lead you to make decisions that aren’t always in your best financial interest. It may also lead you to playing it safe when it comes to your retirement savings. The right retirement plan for people in their 50s may include a bit more risk-taking, due to the fact that they have waited to start saving. A financial advisor can help you gauge how much risk you’re willing to take on in order to have the retirement you want.
Additionally, you’ll want to visit with your financial advisor about your goals in general. While you don’t want to be discouraged about your current financial situation, you also want to be realistic about the goals you set for retirement. Sometimes, having a second set of eyes looking at your personality and your finances can help you make more attainable retirement goals. If your goals seem attainable, you stand a better shot at achieving them.
Final Words on Retirement Savings After 50
If you’re 50 years or older and have no retirement set aside to speak of, take heart. It’s not too late to turn your financial situation around. Playing catch-up when it comes to your retirement will require you to do a bit of planning and to make some sacrifices, but the results can be astonishing.
Start by talking to a financial advisor about your situation. This professional can help guide you through some of the options that are only available to people in their 50s and beyond. These options will help you make up for lost time, so to speak. You’ll also want to have a set of concrete goals and be willing to think outside the box if necessary. If you’re willing to make all the sacrifices that go with the steps outlined above, you can, indeed, have a comfortable retirement.