You can always start putting money away for the future. Birmingham, Michigan-based certified financial planner Nicole Gopoian Wirick believes that in an ideal world, people would begin saving for retirement as soon as they earn their first salary. However, we know that reality isn’t ideal and that late starts are occasionally inevitable.
Moreover, it’s really widespread. 45% of working persons over 60 are confident that their retirement savings plan is on track, according to a 2018 Federal Reserve survey. This is in contrast to the 25% of working adults with no retirement savings or pension.
You can still save money if you’re over 50 and worried about your retirement savings. It’s never too late to construct a thorough financial strategy to reach your goals, adds Wirick.
Take into account the systematic strategy advocated by money experts across the United States. Spend less than you earn, and save money automatically by revising your budget biannually.
If you are unsure where to start, consider the eleven steps below.
1) Examine your budget
First, you should examine your budget and cut unnecessary spending to free up some cash. Nadine Marie Burns, a certified financial planner in Ann Arbor, Michigan, claims that many of her clients overpay for food. More than $100 a month may be saved on wasted or unused foods by just making a meal plan.
2) Establish a saving target
The next step is to determine a reasonable savings target and the amount that can be set aside on a regular, automated basis. If it seems too daunting, just do it one step at a time. Financial planner George Gagliardi of Lexington, Massachusetts, advises his clients to count on living a fairly long life, potentially into their 90s while planning their retirement income. Although your lifespan is ultimately out of your control, the typical man born in 1950 has a 30% chance of living to age 80, and the average woman born in 1950 has a 33% chance of living to age 83, according to the Social Security Administration.
3) Reduce your debts
Have you racked up any credit card bills? Reduce your debt as soon as possible so you may put more money into savings. A financial planner in Rockville, Maryland, Malcolm Ethridge, concurs that getting your mortgage paid off is a good idea before you retire. He argues that if you can cut down on housing costs, it will lessen the amount of annual income you need to replace. College Station, Texas, CFP Natalie Pine advises clients to keep their debt levels low. For instance, if you have automobile debt, open an account and keep making those car payments once you have paid the debt. By saving the payment amount, you will have a significant down payment for a new vehicle at a future date. The author advises.
4) Keep investing
It is important to take advantage of dollar-cost averaging whether you have a nonretirement portfolio or are self-employed and manage your retirement fund by investing automatically. The more consistently you invest, the more shares you will buy when prices are low and the fewer shares you will buy when they are high.
According to Sandra Adams, a certified financial planner in Southfield, Michigan, you need an aggressive investment portfolio that includes at least 60% in equities to assist you in attaining your long-term goal. But don’t put yourself in a position to sell low when the market crashes by taking on too much risk. She warns against making the mistake of “jumping in and out of the market,” which she says might result in major setbacks in your goal, especially for those who are “beginning late.”
5) Max out your contributions
According to New Jersey Certified Financial Planner James Shagawat, employees should put enough money into their company’s retirement plan to qualify for the full employer match. If you’re 50 or older, you may put in up to $26,000. Inquire about any supplementary pension schemes provided by your employer.
However, there is a danger of “concentration risk” if your employer matches your contributions with shares in the firm. According to research conducted by the Employee Benefit Research Institute, more than half of all 401(k) account balances are held in company stock by plan participants who get their employer match in the form of company shares. Your returns might be negatively impacted if the firm underperforms.
You may counteract that by putting money into a Roth IRA and spreading it among other investments. A Roth IRA is funded with after-tax earnings, so retirement withdrawals will also be tax-free. If you’re 50 or older, says Shagawat, you may put away up to $7 000 a year. In 2021, if you are single, your eligibility will begin to be reduced between $125,000 and $140,000 of your modified adjusted gross income (MAGI), and if you are married filing jointly, between $198,000 and $208,000 of your MAGI. Justin Meinhart, a CFP based in Winston-Salem, NC, advises clients to make these investments before the end of the tax year rather than waiting until the April 15 filing deadline. More than a year’s worth of compound interest and growth can be added to those funds.
6) Make a contingency plan
Remember the importance of safeguarding your retirement savings by establishing an emergency fund to meet unforeseen costs. Pine advises adding to it with any pay increases or bonuses you may earn. She recommends that you consider insurance, particularly disability coverage. It will be tough to recover from setbacks if you cannot work after age 50 and haven’t saved. Get the right insurance coverage for your house and car, and consider umbrella insurance. Obtain medical coverage immediately.
7) Consider a side hustle
Do you still require further funds? The next step is to find a part-time job that you will love and sell some of your unwanted belongings on eBay or through one of the many “sell your things” applications available today.
CFP Benjamin Offit of Towson, Maryland, recommends selling your property and relocating to a smaller home or a region with lower housing rates. If you downsize your home, it could save you a lot of money.
10) Forgotten Accounts
Sarah Carlson, a CFP in Spokane, Washington, recommends looking via your state’s lost asset portal for any forgotten accounts. If you’ve worked for other companies before, you may have bank accounts that were forfeited to the government. Her customers have gotten back in touch with funds they had either forgotten about or lost track of after relocating without receiving the necessary paperwork.
11) You should put in as many hours as possible
According to Conshohocken, Pennsylvania-based CFP Sean Pearson, the retirement age has risen, and politicians are discussing raising the age again. His most content customers are those who continue working beyond 65 but in a less demanding profession. People who have earned money and are older than 70 and a half can keep contributing to their conventional IRAs under the SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019. He adds that the longer you work and put money away, the less your retirement will be funded by your savings.