Help! I’m Running out of Time

5 Retirement Planning Tips for 40 and 50-year-olds with little to no retirement savings.

When our grandparents retired, most employees received a golden watch and a pension that promised a guaranteed life-time income.  Not bad at all! 

For most working individuals today, however, pensions are a thing of the past and now it is up to each one of us to provide for our own retirement income once we stop working.  In the mid-90s, the stock market was booming and our IRA and 401k plans were growing like weeds.  But after a difficult decade of little growth in the stock market coupled with high levels of unemployment, many people are finding themselves in their 40s and 50s with practically no money saved for retirement.  If you find yourself in this painful predicament, don’t panic.  Here are a few things you can still do – the key is to do them now.


1.  Prioritize:  When you first joined the workforce, retirement looked so far away and it was easy to justify putting off retirement savings in favor of the nicer car or bigger condo.  Then, once children came along, your financial obligations seemed to grow and for many, saving for retirement was the last thing to get attention.  Looking back, it may seem like a blink of the eye, but years have passed and you’re no longer the young fresh-faced kid that finished school and took a “real job” for the first time.  The future is here and before you know it, you’ll receive your very last paycheck and be among those we call retirees.   It’s time to stop putting retirement last and make it priority number one when it comes to your personal finances.


2.  Max-Out Your Retirement Contributions:  If you’ve been short-changing your IRA or 401k plan, it’s time to get serious.  Reduce your spending and find ways to contribute more.   If both you and your spouse work for companies that offer a 401k plan, be sure that each of you are contributing at least enough to capture any matching contributions offered by your employer.  And don’t stop there; this year the 401k contribution limit has been raised from $16,500 to $17,000, and if you’re older than 50, you’re allowed to make an additional $5,500 catch up contribution too.   For IRAs, you’re limited to $5,000 or $6,000 if you’re age 50 or over.


3.  Plan to Postpone Retirement:  If you delay the date of your retirement, you’ll give yourself more time to make contributions to your retirement accounts, plus you’ll postpone the need to take withdrawals.  Think about what this means – not only does your nest egg have more time and opportunity to grow, it will also reduce the amount of money you need to accumulate since the years you spend in retirement will be less. 


4.  Understand Your Social Security Benefits:  Last year, the Social Security Administration reported that the average retirement benefit paid to retirees was $1,777 per month, or just a bit more than $21,000 per year1.  That’s a nice supplement, but for most Americans, it clearly isn’t enough to live on.  Currently about 73 percent of all Americans take early social security benefits which are available at a reduced amount beginning at age 62.  But for each year you delay signing up, your social security payments will increase.  A worker born in 1963 currently earning $100,000 per year can expect to receive about $1,729 per month if he or she begins collecting at age 62.  This amount will increase to $2,471 per month if that same worker waits until age 67, and to $3,064 monthly at age 70.2


5.  Think different:  More and more people are choosing to retire outside of the US in places where their dollar goes farther.  Places like Belize and even Mexico have growing communities of American retirees because the cost of living is so much less than in the states.  Other retirement options include trading down to a less expensive house (and using the proceeds to fund your retirement), or simply deciding to work a part-time job as long as possible. 




1 http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/13/~/average-monthly-social-security-benefit-for-a-retired-worker

2 http://www.aarp.org/work/social-security/social-security-benefits-calculator/?cmp=RDRCT-SOCI_JUNE15_011


About this column: Steve Davis is a local CERTIFIED FINANCIAL PLANNER™ who has been helping clients in Mansfield, Foxboro, Easton and other local communities for more than twenty years.   You can find out more about Steve and his company, Davis Financial at www.talkwithdavis.com 

Securities offered through LPL Financial Member FINRA/SIPC

Jen Vondenbrink January 30, 2012 at 12:41 PM
Great tips Steve. I have to admit I've been an on again, off again retirement saver, especially with starting a new business. This however has become a priority for me over the last year or so. I think the key is prioritization. We can all think about 100 different things we want to do with our money, saving needs to be part of that list...near the top. Thanks again for the great advice.


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