Are you 50 and just now starting to save for retirement? Worried that your retirement may not be exactly like you planned? You’re not alone. According to a study from Gallup, retirement is America’s top financial concern. More than 50 percent of Americans are worried that they will lack money for retirement.1
There may be good reason for concern. A study from the Economic Policy Institute found that the median retirement savings for American working families is just $5,000. Among those between ages 50 and 55, the median savings is $8,000.2 So while you may feel anxiety about your retirement planning, you’re not the only one in this position.
The good news is it’s never too late to make adjustments and start preparing for retirement. Below are a few tips to help you get started. You also may want to consult with a financial professional. They can help you develop and implement a strategy.
Stick to a budget.
Do you use a budget? If not, now may be the time to start doing so. Nearly a third of American families don’t use a budget, even though it’s a powerful and helpful financial planning tool.3
Your budget can help you make smart purchasing decisions and save more money. You can use an app or software or even a simple spreadsheet. Simply list all of your spending categories and then look for areas where you can make cuts. The key is to update your budget, stick to your spending goals and contribute your extra cash flow to savings.
Use catch-up contributions.
Does your employer offer a 401(k)? Do you have an individual retirement account (IRA)? These types of accounts are powerful retirement savings vehicles because they are tax-deferred. That means you don’t pay taxes on growth as long as the funds stay inside the account. That may allow your assets to compound at a faster rate than they would in a taxable account.
Starting at age 50, you can contribute more money to these accounts through something called a catch-up contribution. A catch-up contribution is an extra allowable contribution amount for those approaching retirement.
In 2019, you can contribute up to $19,000 to your 401(k) plan. However, if you’re 50 or older, you can contribute an additional $6,000, bringing your total allowable contribution to $25,000.4 You can contribute $6,000 to an IRA, plus an additional $1,000 if you’re 50 or older.5
Consider delaying retirement.
If you’re just getting started on saving for retirement, you may want to rethink your retirement age. There’s benefit to delaying your retirement. Every year you wait to retire, you give yourself another year to save money. You also eliminate a year of retirement that would have to be funded by savings.
There’s one other benefit to delaying your retirement – you could get more from Social Security. You get your full Social Security benefit when you retire at your full retirement age (FRA), which is between 66 and 67 for most people.6
However, you don’t have to file at your FRA. You can delay your filing. If you do, Social Security will credit your benefit amount by 8 percent for each year you wait. The credits stop at age 70. However, if your FRA is 66 and you delay your filing to 70, you could earn a 32 percent bonus on your benefit.7
Protect your assets.
Finally, you may want to consider a strategy that minimizes your exposure to risk. As you approach retirement, you have less time to recover from a market downturn. It’s important to grow your assets, but it’s also important to reduce threats like market volatility.
A fixed indexed annuity (FIA) could help you do just that. FIAs pay annual interest based on the performance of a market index, like the S&P 500. The better the index performs, the more interest you may earn, up to a limit. If the index performs poorly or loses money, you may earn less interest. However, you never lose money due to market losses. An FIA could be an effective protection strategy for a portion of your assets.