How to Overcome a Late-Start in Retirement Planning

If you’re in your late 40’s or even early 50’s and don’t have a plan for retirement – that is, how to support your post-work lifestyle – it’s not too late. For those who didn’t start saving for retirement earlier, there are strategies for “catching up.” Here are some questions to guide you:

1. How much will you need to save?

Start with an estimate of how much money you'll need to live on in retirement. Think about what kind of lifestyle you will want and how that compares with your current situation. A ballpark figure will work. A retirement calculator can help you determine how much you will need.

2. What income sources will you have?

A common, if an outdated metaphor for retirement planning is the "three-legged stool." Mid-20th-century retirement plans included employer pension, employee savings, and Social Security. All three legs were needed to balance the stool for retirees. In today's world, your personal savings represent a much longer leg. The two smaller legs add stability, but the personal savings column is what will support your retirement.

3. Can you maximize an employer-sponsored plan?

If your employer offers a voluntary contribution retirement plan, and you're not already participating, sign up and try to contribute the maximum allowed. This is particularly wise if your employer matches a percentage of your contribution. If you are over 50, consider taking advantage of the increased contributions you are allowed.

If your company doesn’t offer an employer-sponsored retirement plan, or if you choose self-employment or contract work, look into contributing to an individual retirement account (IRA) or other investment options. 

4. Can you reduce any expenses?

It's time to spend less than you make. Looks for ways to cut back on lifestyle expenses. Are your housing costs too high? Are you paying for more space than you need? Consider downsizing and investing your savings for retirement. It could make a difference in your ability to boost savings. Look at the amount of debt you are carrying and try to pay off your credit card debt. The interest payments should go into savings.

5. Should you increase your income?

If you're still worried about having enough money to retire, consider getting a second job and dedicating your earnings to savings.

The older you are when you start seriously saving for retirement, the harder you'll have to work at it, but it can be done. Most people benefit from having a financial expert in their corner. Think about how much of your life involves bills, taxes, purchases, contracts, etc. When it comes to financial planning, your tax professional is in a unique position to give you advice on retirement planning.