Saving for Retirement – Tips for Late Starters

saving for retirementAre your retirement years fast approaching and your savings not fitting the bill?  According to the Employee Benefit Research Institute, 58% of Americans 55 and older have less than $100,000 in savings.  There is a smaller percentage (19%) who have $250,000 or more for retirement.  A lack of retirement savings seems to be a concern of many, but it doesn’t mean there are no options.  While you have lost the magic of compound interest, you still can work hard to fill your retirement coffers.  Here are a few ways to save for retirement when starting late.

Know What You Need

The first step to saving for retirement is knowing how much you will need to retire. You don’t need an exact number.  That’s too much hassle.  Just know where you should be (ballpark) based on your age, how much you make, when you’ll retire, and your savings rate.  Don’t waste time with putting this on paper, use one of the great online retirement calculators, like this one.

Understand Where Your Money Will Come From

Most people reaching retirement age will have access to Social Security.  As you are calculating how much you need and want for retirement, don’t forget to include your Social Security benefits, along with any pensions or work retirement plans you already have.  These will go toward your monthly retirement stipend, so calculate them.

Create Goals

Calculating how much you need will only get you so far when saving for retirement.  You need to come up with goals to make up any difference you have between what you will already be getting and what you need to get.  Do the math and then come up with goals to reach those savings plans.

Have a Plan

Now that you have defined your goals, it is important to have a plan on how you will get there.  A professional retirement planning advisor  can help you refine your goals and provide you with concrete steps to take in order to achieve those goals.

Reduce Expenses and Save

One of the easier ways to save for retirement is to reduce expenses.  Since you will be living on less (most likely) in retirement, you should start slashing expenses now and getting into the habit of living as you would when you retire.  Don’t just slash expenses, but take that money and put it in your retirement savings or use the extra savings to pay down mortgage debt. Housing and food are typically the largest spending categories for most individuals so these are the areas to focus on first. Refinancing for a lower payment or downsizing are the easiest ways to reduce your monthly mortgage payment. And saving money on food is just as easy with these 10 tips to lower spending on food.

Maximize Your Contributions

If you don’t have a 401(k), but have access to one, sign up, and start contributing.  This is especially true if your employer matches.  Along with a 401(k), you can also contribute to a Roth IRA if you are under the income limits. The maximum contribution is $5,500 per year or $6,500 if you are 50.

Pay Off Debt

The last tip everyone should follow when saving for retirement is to pay off debt.  The more debt you have, the less you have for retirement.  This applies to any debt, such as credit cards and your mortgage.

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6 Responses to Saving for Retirement – Tips for Late Starters

  1. Bob C 12/11/2014 at 8:23 am #

    Hi Paul,

    Very well written article. I actually read a book recently which you may find interesting called “Build Wealth and Spend It All” by author Dr. Stanley Riggs. I finished it truly feeling like I have learned invaluable lessons about the future of my families finances. Most people are so hung up on retirement and how much money they will end up with, they don’t take stock of what to do with it along the way. Dr. Riggs offers very down to earth advice and planning for the everyday person to not “get rich quick” but instead to build wealth…which is much more valuable in the long run.
    Worth a look:

  2. Jayson @ Monster Piggy Bank 12/01/2014 at 4:53 am #

    It is indeed not late to save for retirement. I myself started at the age of 29. I thought it was late, but am now satisfied that I at least started than I didn’t. Now, I believe pursuing is the key to success in my understanding.

  3. Nik @ Midlife Finance 11/30/2014 at 8:39 am #

    Thanks for this post! I am one of the people who started late when it comes to retirement savings. This article is an extra fruitful information that I can incorporate as I go through my retirement savings.

    • Paul 11/30/2014 at 9:25 pm #

      The math is pretty simple Nik, the longer you wait to start saving for retirement the higher the percentage of monthly take home pay you will need to set aside. Pre-tax contributions, company match, and time can make it a little easier to stomach though.

  4. How To Save Money 11/26/2014 at 6:10 am #

    Nice article! I think this is good because most articles today are targeted for the yuppies. We also got to take care of those older than us.

    • Paul 11/26/2014 at 6:39 am #

      The statistics show that the average American has roughly $4k in retirement savings so this topic needs to be discussed more!