It’s understandable: You were working tirelessly to provide for your family. Maybe you prioritized your children going to college, or maybe you dealt with serious health issues. Maybe you didn’t make the best decisions along the way. But in any case, you reached your 50s and don’t have retirement savings. Now, what do you do?
If you are one of them and are already in your 50s, the good news is that you still have a good chance to keep up with your savings before you retire. But one thing is for sure: You need to act fast.
Ready, Set, Go!
The first step to start saving for your retirement is to evaluate your current financial situation. You need to know your monthly budget, considering dependents and any debts. And then, basically start cutting expenses and maximizing your savings.
- At what age do you plan to retire?
- How much monthly income do you need to spend post-retirement?
- Will you be working part time even after retirement?
- How much are you allotting per asset type?
This can be harder than it sounds. It’s prudent to consult with a financial adviser who provides personalized advice based on your specific financial situation.
Save as Much as You Can
First, pay off your debts. “Tackle high-interest debts aggressively. Paying off these debts can free up more funds for retirement savings and reduce financial stress,” Taylor Kovar, CEO at Kovar Wealth Management, said.Then, you can evaluate your expenses and decide what to cut off. Do you really need every single streaming service? Keep one or two, and unsubscribe from the rest. Do you usually eat out or get your food delivered? Start cooking at home and save money. Same with drinking your coffee at popular chains—it may not look like a big expense, but when they add up week after week, it can help you to save a good amount of money.
“Cutting unnecessary expenses can free up additional funds for more savings. This may include reassessing housing, transportation, and lifestyle choices. In my case, I limited and planned my travel routes in order to save on fuel costs and delay wear and tear on my vehicle,” Mr. Quisumbing said.
Cutting expenses might mean moving to a smaller home, a cheaper state, or even a different country.
If you’re open to moving to a different state, consider the cost of living and tax rates. The weather and local attractions could be a factor depending on your lifestyle.
Florida is a popular state to retire to. The cost of living is reasonable, and Florida is a tax-friendly state—no inheritance tax, estate tax, or state income tax. The beaches and the warm winters are definitely a plus.
Colorado and Delaware are also good choices for tax reasons. If you are a veteran, Virginia offers you many health care and tax exemption benefits.
Look for More Sources of Income
After you adjust your budget and reduce unnecessary expenses, look for more income sources.“You need to maximize your income while you’re still of sound mind and body,” Mr. Lieberman said. “Earlier in life, you may have taken jobs you enjoyed that paid less. Now is the time to take the jobs that pay more—if you want to retire. This may include learning a new skill, like sales. This is the 21st century; you don’t need a college degree. You can learn nearly anything online.”
The internet offers many opportunities to get additional income. You could become a delivery driver for popular food apps or grocery stores. If you have an extra room at home, try renting it on platforms such as Airbnb. If you are passionate or knowledgeable about a certain topic, there are online tutoring platforms where you can help someone from your home while accumulating more savings.
“Making more money in your remaining working years not only helps you now, but it'll entitle you to higher Social Security payments in the future,” Mr. Lieberman said.
Start Contributing ASAP
The first step is going to SSA.gov to see how much in Social Security benefits you have accumulated. “About 97 percent of people in America will receive Social Security benefits. Throughout your career, whether you worked for a big company, a startup, or even yourself, there’s a good chance you paid into Social Security,” Crissi Cole, founder and CEO of Penny Finance, said.
Second, check with your employer if you have access to a pension. Teachers, police officers, business professionals, and state employees usually have access to a compensation package that functions similarly to Social Security. These pensions disburse monthly payments from your employer once you retire. You can check to see how much this might be, Ms. Cole advised.
The third step is to contribute to a 401(k). Financial experts agree that if you have a 401(k), you should contribute as much as you can afford. If you are older than 50, you can take advantage of “catch-up contributions” and contribute up to $30,500 in 2024.
Check what savings plan your employer offers, and pick an investment method that suits your situation.
If you don’t have access to an employer-sponsored retirement account, you can open an IRA and invest up to $8,000 per year.
Another option, if you are eligible, is to contribute to a Health Savings Account (HSA). “The reason is this reduces your tax burden and you can use your HSA for qualified medical expenses. If you get lucky and have no medical bills, you can use the money for whatever you want after age 65,” Mr. Lieberman said.
A good choice is to make the retirement contributions automatic. What you do need to remember, though, is to control your daily spending. Remember that every penny saved today can make a difference in your retirement years.
There’s also the option of pushing back retirement. If your health allows, keep working and saving until you are 75. Each year can add savings and compounding interest, making a nice difference.
“Delaying Social Security benefits by retiring at a later age can result in higher monthly payouts. If possible, consider waiting until full retirement age, or even beyond to maximize the benefit,” Mr. Quisumbing said.
Do the Math, and Look Ahead
At the end of the day, planning retirement involves a lot of math. That’s why, unless math and interest rates are your thing, it’s better to consult with a professional before making your decision.“The hard part about all of this is that it is truly a multivariable math equation. How much will you need? When will you retire? How much can you save now? What are the tax savings? And boom, there you go,” Ms. Cole said.
For example, if you are 50 and want to retire at 70 with a million dollars, you’ll need to put $2,000 every month into a retirement account and invest it. “This is about the max of an employer-sponsored retirement account. Strive for this. Subtract Social Security and pension of the monthly amount,” she said.
Last but not least, you need the right mindset. Never mind if you’ve reached your fifth decade with no retirement savings. You still have time, but you might need to change your habits and develop a long-term mentality.
If you are in your 50s, you might not be familiar with the term “YOLO,” meaning “you only live once.” Forget about that if you want to retire.
“This behavior can lead to spending patterns that focus on enjoying the moment and spending money like there is no tomorrow. In saving for the future, it is important to learn delayed gratification, save, and let your money grow so that you can reap the benefits at a later point in life, such as retirement,” Mr. Quisumbing said.
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