Retirement Strategies for Late Starters
Many retirees will be in for a terrible surprise when retirement day comes. The average pre-retirement Boomer only has about $9000 per year in retirement income headed their way, and a shocking one-third of Americans say that they have zero retirement savings. So considering that 76 million Baby Boomers are just around the corner from retirement, the not-so-awful news is that even for late starters, there is still time to get retirement savings back on track.
That’s not to say that all will be well if you only start saving at age 50 and hope to retire at 55. The saying goes that it’s never too late to start saving, but for those who are about to retire and literally have no savings at all, well, the sad news is that it kind of is too late. A realistic view of the situation is appropriate. Many people have discovered the FIRE movement (Financial Independence/Retire Early), and it has reshaped the way that they are approaching their financial preparedness for retirement.
The truth is that while starting early is definitely a more preferable option, it is still better late than never. Think about it this way. If you don’t have any savings set aside and you’re in your mid-40s. Compare that to someone your age who took advantage of their first job’s 401(k) offerings. They’re now sitting on a pretty decent sum of accumulated savings.
But again, that’s not to say that all is lost. There are steps that can be taken, even when getting a late start, that will set you up nicely for your retirement. It might take a concerted effort and some smart and disciplined strategizing, but you can get it done.
First and foremost, you’ll need to assess when you want to retire. Then working backward from there, you can set in motion an achievable plan to make it to the summit of your Retirement Everest.
It may take putting away 20% of each paycheck. Or if that’s too overwhelming, then working your way up to that. Start with 5% and in the process of scaling up your savings, you can take a closer inspection of how to minimize your spending habits. There are useful online budgeting programs that can help you find neat little ways to save. Then redirect those funds into your savings. If you’re a parent and your kids are grown, try redirect the money that you would have been spending on them into your retirement accounts.
When you consider living out your retirement as a pauper versus having a comfortable lifestyle in your golden years, your priorities shift, and keeping up with the Joneses isn’t as important, is it? Try trading in that flashy car and refrain from purchasing fancy new clothes every season, or foregoing the twice-weekly expensive restaurant visit (Americans spend over $3,000 on those meals each year) [4] and come to think of it, do you really need cable TV nowadays?
Retirement planning isn’t just “putting X amount of dollars away.” The way to predict your retirement future is to create it — that is, be very clear about your goals. What will your lifestyle be like? What do you want to accomplish? How will you fund your activities? Will you work part-time to support these goals?
Stabilizing your finances through reduced spending is a smart strategy, no matter how close you are to retirement. Structuring a conservative budget and sticking to it is an antidote for out of control spending and debt. When it comes to retirement, you will have established good habits, and more than likely have some extra cash at your disposal.
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