Saving For Retirement In Your 50s

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Are you approaching 50 and starting to panic a little about how much money you are going to need to save for retirement?  Saving for retirement in your 50’s is important since many save a bulk of their retirement savings in this decade of life.  It’s also a good time to look at what you’ve stock piled, and do a realistic analysis of how much you’ll need to save over the coming years.

According to Investopedia, the average American between the age of 55-64 has about $104,000 saved for retirement, which isn’t enough for most Americans live anywhere near their current standard of living in retirement.

Given that many Americans in their fifties are still in a stage of life when expenses are high, coming up with good savings strategies at this point is key to getting to your goal.  The good news is that most in this age group are earning more now than ever, and some of those major expenses may begin to tail off (think about the day the kids graduate college, or those mortgages are paid off).  It’s typical for people to save the most towards retirement in these years, especially after some of these expenses have been removed.

Maximize your savings

So what are some ways a savvy person can start saving for retirement in your 50’s:

Hire a financial planner – Of course this has to be number one, but as with all major financial decisions in life, if possible, it’s always recommended you consult with a professional financial planner.  Keep in mind that you don’t necessarily need to meet with your planner on a regular basis and have a large sum of money under management.  Just hiring a planner for a one-off session to help put a long term plan and budget together can be a great first step.  Sometimes we all need an external set of eyes to give us a realistic picture of what we have, and how we can get to our goals.  Many of you may even find that you’re not as far behind in the game as you might of thought.

Catch-up Contributions to 401K and other savings plans – Individuals over the age of 50 are eligible to make annual catch-up contributions to various retirement savings plans including, 401(k), 403(b), SARSEP, and governmental 457(b).  Elective deferrals are not treated as catch-up contributions until they have exceeded the limit of $18,000 in 2015-2017.  You can also make catch-up payments to your traditional or Roth IRA up to $1,000 in 2015-1017.

Manage your Real Estate

Move to smaller house – Yes, we know this is a big deal, as many of you have lived in your home for years, are completely in love with it, and are planning to spend the rest of your lives in this home.  But, if you’ve run the numbers, and are in need of putting a lot more in the bank for retirement, selling your home, and moving somewhere with lower costs, and/or an area with lower costs of living, then this can have a big impact on your ability to save more for retirement today.

According to the Taxpayer Relief Act of 1997, if you are single, you pay no capital gains tax on the first $250,000 you make when you sell a home, and it doubles to $500,000 if you are married.  So if you not only have a significant amount of equity built up, but also a decent increase your homes value, this sale can leave you with a nice amount of money to invest in higher returning investments today.  Couple that with a move to something with lower costs, and you can see how this has the potential to result in large increase your retirement savings.

Think twice about that second home – If you splurged on that second vacation home on the lake, or that Walt Disney time share that the kids have loved for years, this might be the time to reconsider.

In today’s world there are a lot of ways to take fun and more cost conscious vacations such as using sites like Airbnb and Homeaway which allow you to rent out someone else’s property for a few days.  This allows people many of the niceties of their own home, but without the large ongoing expense of a mortgage and maintenance costs.  It also gives the added benefit of variation and the excitement of seeing something new on those family vacations.

Reduce Debt and Expenses

Pay off debt – Sometimes people don’t think of paying of debt as a means of saving, afterall the cash isn’t increasing your savings accounts, or stock market investments, so it can be difficult for the brain to view it as an investment.  That said, if you have outstanding debt, especially with high interest rates like many credit cards the payment of those, and ridding yourself of those annual interest rates is saving you as much money as putting it into an investment that earns you the same interest rate on the positive end.

Nickel and dime a little – This isn’t likely to be a big hitter, but in your 50’s your still young enough to reap the rewards of decreasing monthly payments buy a few hundred bucks.  It’s not bad to make an annual practice out of reviewing utilities, cell phone, internet, cable, and any other monthly payments to see how those costs can be brought down.  If you haven’t shopped these services around in recent years, and their are competitors in the market (which there almost always are) you will most likely find that you can save a decent amount of money.  Even if you don’t really switch providers, find the lowest cost provider in your area, and make a phone call to your current providers “retention” department.  It’s very common for them to lower rates without a fight if they know you have a credible competitor with lower rates with low switching costs.  Check these opportunities especially with internet, cable, and cell phone services as you’d be surprised at how aggressive they will be to keep your business.

Find a retirement job – While it may sound like you haven’t actually retired if you have a job, a growing number of people are actually planning to work part-time, or even start a business of some time after retiring from their main job.  The beauty of this option is that it continues to bring in some money, and assuming you find a flexible endeavor, it can actually fit in very nicely with your overall plan for retirement.  If this is something you might want to consider, starting to think now about what you might like to do (especially if you’d consider starting a business of your own) and laying a groundwork would be well advised.

Do you have other ideas when it comes to saving for retirement in your 50’s?  We would love to hear from you in our comments section below.




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