Fifty may be the new 30, but when it comes to saving for retirement, there’s no turning back the clock! If you’re on course to meet your retirement goal, that’s great! But you’d probably like to do even more to make sure you’ll have the retirement you want.
On the other hand, if you weren’t serious about investing for your future before you turned the big 5-0 . . . we’ll just say there’s no time like the present. You still have time to make lots of progress!
If you are 50 and want a fabulous retirement, here are four tips for successful retirement saving on a tight timeline:
Get Savings Help From Uncle Sam
Even Uncle Sam knows it’s tough to save for retirement when you get a late start, so folks your age have some tax-advantaged options to help them catch up:
- Beginning this year, folks 50 and older can invest an additional $6,000 in their 401(k) plans, which means each individual can invest a total of $24,000 per year in their 401(k).
- People in their 50s can also invest an additional $1,000 a year in their Roth IRA, for a total of $6,500 per year.
The money you contribute to your 401(k) reduces your taxable income now, and, when you retire, money you withdraw from your Roth IRA won’t be taxed at all!
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Add all that up, and you and your spouse could sock away more than $60,000 a year for retirement. That is a ton of money—$900,000 if you save from age 50 to age 65. Invest it in good growth stock mutual funds, and you could double it to more than $2 million!
Most people won’t be able to put away that much for retirement each year, but just a fraction of that can make a huge difference in the kind of retirement you’ll be able to afford. Saving and investing just $10,000 more each year can add almost $350,000 to your retirement over 15 years.
Go Big: Eliminate Your Mortgage for an Instant Raise
For many of us, our living expenses are standing in the way of our retirement goals. Since your largest expense is probably your mortgage, why not take aim at that bad boy and get rid of it for good?
“One of the easiest ways to give yourself a raise in retirement is to pay off your house,” Brant Spesshardt, an investing professional, said.
Obviously, one option for paying off your mortgage is to make extra payments and whittle away at it one bit at a time. But don’t dismiss the idea of selling your home and downsizing to one you can pay cash for. That will immediately free up thousands of dollars you can use to build up your nest egg.
For example, if your monthly mortgage payment is $1,200, that equals $14,400 in annual cash flow, Brandt explained. To come up with that $14,400, you’d have to earn around $18,000. So by paying off your mortgage or downsizing to a paid-for home, you’ll free up about $18,000 a year.
If you’re in a position to invest all $18,000 for retirement, you could add more than $625,000 to your retirement fund over 15 years!
Get Emotional About Your Retirement Vision
Downsizing your home and devoting tens of thousands of dollars to retirement will mean a lot of change in your life, so Brant says you need to find an emotional motivator to get you to take action.
“Think about what gets to you emotionally,” Brant said. “If you hate going into the office every day, and you can’t wait to retire and just kick back, use that to your advantage. Let it drive you as you work your plan.”
The same goes for folks who dream of working in the mission field or volunteering at a local charity or school, he added. “You’ve got to have a motivational factor to keep you going. If you don’t have a dream, you won’t have the focus and intensity you need to keep going on your retirement plan.”
Focus on the big picture, Brant said, and every sacrifice you make in order to reach your goal will just add fuel to your fire.
Get Some Grown-Up Accountability
“Folks who are 50 have less and less wiggle room for getting serious about retirement,” Brant said. That's why an accountability partner is so important for investors at this age. “You need an accountability partner—not just your spouse. An objective third party who will hold your feet to the fire.”
“You need someone who cares enough about you to shoot straight,” Brant added. “We’re not getting any younger, so if you want to retire someday, you’ve got to work with someone who will make sure you’re taking this seriously.”
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