If you are in your 50s and have been slow to save for retirement, it’s time to shift into high gear.
Unless you never plan to quit working, you need to take a reality check now to see what it’s going to take to cross the retirement finish line with enough money to cover your living expenses.
The big questions are:
- Have you saved enough?
- And if not, can you start saving seriously right now?
Here are some important things to think about:
At what age do you plan to retire? Working with target dates and online retirement calculators can help you decide if your target is realistic.
Are you sure you can afford it? It’s not uncommon to find that working – and saving – for a few extra years can make a big difference in your post-retirement income.
What are your plans for retirement? It’s important to remember that you’ll still have expenses once you retire. You will need to buy food, pay bills, have a place to live, and cover medical costs. But what about plans for travel or new hobbies? Without new money coming in, you’ll need to have enough saved to keeping paying for those expenses.
Can you reduce your expenses now so you can start saving more? Paying off your bills and cutting back on spending can allow you to put that money into savings. Some experts even say that downsizing your home might be a consideration.
Here are some things you can do:
Contribute as much as you can to your work retirement plan –such as a 401(k) or 403(b) - Current limits for plans like this are $18,000 a year, and people over 50 can add an extra $6,000 each year. Don’t forget that many employers add some form of matching contribution to retirement plans.
Look into IRAs. An IRA is another way to save for retirement. Check with your financial institution or a financial advisor about options such as Roth or traditional IRAs.
Look at your other income sources. Social Security will be a help, but probably won’t be enough to cover all of your expenses. You can estimate your annual Social Security income at www.ssa.gov/estimator/. You’ll notice that waiting a few years to start taking Social Security can make a significant difference in how much you will get each month. And if you work for an employer that still offers pensions, be sure to check what your annual pension income will be.
Try living on that. If you come up with an annual income that you think will work for you, try living on that amount of money for a few months. Can you do it? This is the kind of reality check that can either make you feel good about your plan, or can show you what you’ll need to do to get there.
This is the time of your life to get serious about saving to make a piece of your future a little more secure.