Time is ticking. You’re getting closer and closer to retirement age. But what should you do if you look up after the age of 50 and realize you have not saved nearly enough to stop working?“
Someone in their early 50s has another 10 to 15 years to prepare for retirement. Start thinking about what you want your life in retirement to look like. Consider how will you spend your time, then estimate what your monthly budget will need to be to support your retirement lifestyle. Think about creating multiple income streams–Social Security alone will not support you. In 2017, the average monthly benefit for those age 62 was only $1,112,” suggests financial coach Dr. Martha Menard, a senior researcher at Questis.
Don’t panic, it’s not too late. Here are some other actions you should take.
Seek professional help: Talk with a financial advisor. “Generally, speak with a few friends see who they use. Interview each one and pick the one that is a CFP and likable. A CFP will not solve your problems and that designation is great, but they’re really no better at planning then say CHRP or one without a designation, but if anything you know that they have been vetted by another outside institution,” advises Daniel Wachtel, founding partner at Harbour Capital Partners.
Get your 401K details: You need to be well informed with it comes toyour 401K. “Talk to your company’s 401k or pension advisor and get as much information as possible on the plan and the funds that they offer (401k) because you’re not going to do much with it with your advisor unless you’re over 59.5 years of age and you’re able to move it out of
the company (401k). For pensioners, find out what type of pension you are in and what your distribution options are if you’re single or married,” says Wachtel.
Backtrack: Look for money you might have forgotten you had. The government has an “Unclaimed Money” division that lets you search records from any place you have lived. Many you had a bank account you left open, or investments you lost track of.
Also, backtrack to all the places you have worked. “Call any old companies to see if you didn’t roll over any old 401k’s by accident. This is more common than people think. Leaving a job and starting a new one can be daunting especially if there is a change in location,
you were young and unaware, or you thought they just came with you,” says Wachtel.
Do a family financial checkup: Go through all of your family’s assets and debts.
The “B” word: You will really have to budget now. Make a budget and stick to it. Take a close look at your expenses and get rid of the highest ones if possible. “One of your biggest expense is probably your housing. Paying off your mortgage or downsizing your home can
free up cash that can be invested for your retirement. For example, let’s say you have a $1000 mortgage, which is $12,000 in annual payments or $15,000 in real income. If you invest in the $15,000 in a tax-deferred account, that is about $340,000 over the next 15 years (at a 5% rate of return). Not too bad,” says Geoffrey Bourne, CEO and founder of RETIRETY , a platform for finances, health, and retirement.
Take advantage of catch-up contributions: “You should maximize your tax-deferred savings (401(k), IRA, Roth IRA), and if you’re over 50, you can sock even more away. In 2018, if you’re 50 or older, you can put $24,500 in your 401(k) and $6,500 in an IRA. Also, don’t be too conservative on your investments since come additional risk might be needed to increase your retirement funds. Consider 50-50 stocks and bonds, or even a higher percentage in stocks. However, be sure to speak with a financial advisor before proceeding,” explains Bourne.
Boost your income: Change jobs or look for additional income streams. “I talk to a lot of people who are underemployed and seem to have trouble making ends meet, much less being able to save for retirement. Making just a few hundred extra dollars every month would radically change their situation, allowing them to pay off debt faster or put
away major bucks toward retirement,” notes Dr. Jason Cabler, owner of the Celebrating Financial Freedom blog.
Maybe take on overtime at work or more projects that will equal extra cash. “Making more money might mean you need to work extra hours at your present job, work your way into a higher position at work, or start a side business. When you can find a way to increase your income, that increase will be a source of funds to save for retirement that can build up very quickly, and multiply exponentially once that money is invested,” adds Cabler.