I'm Old with No Retirement Savings –– What can I Do?
October 8, 2020
By Rahul Iyer
No matter how old you are, it’s never too late to start retirement savings. It can be scary to think you are closer to retirement than not and you have nothing saved, but there are steps you can take starting now.
Pay off your Debt
First, before you retire, make sure you have no debt or as little debt as possible. Debt only takes away from what you can save for retirement and if you retire with debt, it increases your cost of living. In short, it increases stress levels all around, so do what you can to pay off your debt first.
Redo your Budget to Include Retirement Savings
If you aren’t saving for retirement, you’re spending your money elsewhere. It’s time to figure out where you’re spending it. Pull your bank statements from the last 6 – 12 months and categorize your spending. Figure out where you can cut, using the funds for retirement instead.
Take your Employer’s Match
At the very least, you should be maxing out your 401K contributions to take advantage of your employer’s match. If you can’t free up enough of your budget to meet it, consider a low-interest loan to make sure you take advantage of the free money.
Make Catch-up Contributions
If you’re in a better financial position than you thought, you are eligible for retirement account catch-up contributions.
Investors under the age of 50, may only contribute up to $19,500 in their 401K (for 2020). Investors over the age of 50, may also contribute an additional $6,500 in catch-up contributions each year they are over 50-years old. This helps you catch your account up much faster. While your employer won’t match the catch-up contributions, it helps you have more for retirement.
If you invest in an IRA rather than a 401K, you may contribute an additional $1,000 to the $6,000 limit, which means a $7,000 total per year in your retirement savings.
Any money you ‘come across’ whether a tax refund, inheritance, or work bonus invest it right away. Don’t spend any of it, but put it in your retirement account as quickly as possible. The large lump sum investment will help your funds grow faster, especially with the compound earnings.
Choose the Right Asset Allocation
It’s easy to choose the conservative route when you’re closer to retirement, but if you’re just starting out, you may not want to. If you have nothing saved, you aren’t going to retire relatively soon, so take advantage of the moderately aggressive investments available to grow your funds as fast as possible.
It’s Never too Late to Start Retirement Savings
It’s scary to think you are in your 50s or 60s and have no retirement savings, but the only mistake at this point would be to ignore your retirement needs. Put steps in place to get money into your retirement account as quickly as possible. Let the compounded earnings grow, giving you access to more financial freedom than you thought possible during retirement.