Saving for retirement is a big but often uncertain issue for seniors. In fact, a study of retirement savings found that many seniors aren’t financially prepared for retirement. The good news is that your fifties leave you plenty of time to make progress on your retirement savings account. If your balance is healthy, you can save even more.
Here are four ways save successfully in a limited timeframe.
Take on extra savings options
People over the age of 50 are now able to invest in a catch up program. This allows them to add an extra $6,000 to their 401(k) plans. This means individuals can invest up to $24,500 in elective 401(k) contributions.
If you’re in your 50s, you can also invest an additional $1,000 in your Roth IRA. This brings the total amount you can invest up to $6,500.
By taking full advantage of these options, it’s possible to save more than $60,000 a year for retirement. If you save that amount each year from age 50 to age 65, this amounts to $900,000 in savings. Investing this money in a growth stock mutual fund can more than double this amount.
While that situation won’t be possible for everyone, even a small amount can make a significant difference in retirement savings. Saving and investing an extra $10,000 between ages 50 and 65, for example, can add nearly $350,000 in retirement savings.
When you contribute to your 401(k), your taxable income is reduced. Additionally, money withdrawn from a Roth IRA won’t be taxed during retirement.
Eliminate your mortgage
One factor that impedes retirement goals is living expenses. If your mortgage is eating away at most of your living expenses, make getting rid of it a primary goal.
Making extra payments can help you eliminate your mortgage more quickly. One other thing to consider, especially if you have children who have grown up and moved out, is to sell your home and downsize. A home you can pay for with cash frees up years’ worth of mortgage. This can be a valuable asset in building your nest egg.
A mortgage payment of $1,200 equals a little over $14,000 in annual cash flow, meaning you’d have to earn around $18,000 to cover the payment. Downsizing would free up this $18,000, and if you’re able to invest all of this money you could add more than $625,000 to your retirement savings in about 15 years.
Find what motivates you
Making these changes is no insignificant thing. It’s scary to even consider major life changes like selling your home and downsizing. It may be even scarier to put tens of thousands of dollars toward retirement instead of investing them in other areas of your life.
If this is the case for you, search for an emotional motivator that will keep you on track toward your retirement goals. If the humdrum of office life bores you, use this as motivation. Let your goal of retiring comfortably drive you to fulfill your retirement plan.
By focusing on the big picture, your sacrifices can give you intensity, purpose, and drive.
Hold yourself accountable
Once you turn 50, you have less wiggle room when it comes to saving for retirement; now is not the time to procrastinate. Find someone (not a spouse) who will hold you accountable and encourage you to stick to your retirement plan.
Make sure this person understands their responsibility and will act as an objective party. Ideally you want someone who will be honest with you and forceful if necessary!