Many people worry about how much retirement savings they have once they enter their 50s and retirement becomes more imminent. Even if you’re a bit behind on your savings goals, it’s important not to worry and instead make a plan to save what you’ll need. This guide will tell you what you need to know about how to invest for retirement at age 50 and beyond. Alternatively, you can consider enlisting the help of a financial advisor who specializes in retirement planning. Either way now is the time to get serious about your financial future, so you are ready for your senior years.
How Much Should You Have Saved at 50?
There isn’t a hard-and-fast rule about how much you should have saved by the time you get to age 50, but there are available averages to help you gauge how far behind you might be. Generally, most experts would say that five to six times your yearly salary is a good benchmark to aim for, but a lot of it depends on what you want to do once you’ve retired. You can’t change the past, either way, so don’t worry about what you should have been doing and instead think about what you can do now to make sure you’re ready for retirement.
Figure out Your Retirement Goals
Before you actually start investing, you need to think about what your retirement goals are and what you want to do when you retire. At what age would you like to stop working? Will you continue to work in a part-time capacity once you’ve retired? Do you want to live in the city you currently reside in, or are you interested in moving? Do you want to travel or do anything else that you weren’t able to do while you were working?
Once you’ve answered some of those questions for yourself and your family, you’ll be in a better place to figure out how much you’ll need to save for retirement. You can use SmartAsset’s retirement calculator to see if you’re currently saving enough each month to be where you want to be when you retire. And if you’re not, you can start figuring out how to close any gaps.
What to Do If You Have No Retirement Savings
Once you’ve figured out what your approximate money needs in retirement will be, it’s time to figure out how to get there. You’ll want to boost your savings and make your money work for you so you have enough when you reach the age at which you hope to retire. Even if you have no retirement savings at age 50, it isn’t too late to get started. Here are the steps and options you can take:
1. Open a Retirement Account
You should be using a retirement account of some sort to invest your money. Whether it’s a 401(k), a 403(b), a traditional or Roth IRA or some other plan, having an investment vehicle to put away money is key. If you’re really kicking up your savings at age 50, chances are you’re decently close to retirement. Because of this, some experts recommend choosing lower risk investment options like bonds. You won’t see the huge returns that riskier choices like stocks can bring, but it’s less likely you’ll see big losses, even if the market turns volatile.
2. Take Advantage of Catch-Up Contributions
Another thing to remember is that now that you’re over 50, you have a bit more leeway in terms of 401(k) contributions. In 2023, employees can normally contribute $22,500 per year to their retirement plan. If you’re over 50, though, you can contribute up to $7,500 more on top of that because you now have access to catch-up contribution limits. If you have the means to do it, try to max out your 401(k) contributions.
Make sure to find out if your company provides a match for 401(k) donations. This is essentially free money for your retirement fund, so try to contribute at least as much as your employer will match. Also, pay attention to 401(k) vesting rules: Some companies require you are employed for a certain amount of time before company matching funds are officially yours.
3. Consider Starting Your Own Business
Once you reach your 50s you likely have acquired a lot of knowledge in whatever industry or industries you’ve worked in. Starting your nest egg late might not be that bad if you’re able to start a successful business. This is often the best way to maximize your earnings, if successful. If you’re self-employed you can also fund a retirement plan and get access to matching funds from your business or an additional amount that you can contribute each year.
Consider Your Taxes
Just because you’re retiring, the tax man doesn’t stop coming to your door. When you’re planning for your retirement, it’s important to think about what taxes you’ll need to pay. If you’ve saved for retirement using either a traditional 401(k) or a traditional IRA, you’ll be paying taxes on that money as it is dispersed to you in retirement.
If you used a Roth 401(k) or Roth IRA, you already paid taxes on that money before it was invested, so you’ll be able to withdraw it tax-free in retirement. For this reason, people who expect to be in a higher tax bracket in retirement than they are in currently should especially consider using a Roth IRA.
Even if you’re already 50, it isn’t too late to get serious about saving for retirement. You may not have all the luxuries someone younger does, but through careful consideration and planning, you can get yourself ready to move on to the next stage of your life. Just make sure you have clear goals defined, and that you take advantage of all the opportunities you have to save. With some hard work and discipline, you can be on the path to financial security in your golden years in no time.
Tips for Retirement Planning
- You might want to think about finding a financial advisor to manage your money. A financial advisor will use their expertise to help you reach your retirement goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Don’t forget about Social Security. Use this Social Security calculator to estimate what you can expect your Social Security checks to be in retirement. After all, this money will play a role in your overall retirement budget.
- If you want to set up and plan your retirement goals, SmartAsset’s retirement calculator can help you figure out how much you will need to save to retire comfortably.
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