Retirement Savings Strategies for Late Starters
Most people aren't putting nearly enough into their retirement accounts to fund a secure retirement. The median value of retirement accounts, including IRAs and 401(k)'s, for workers between ages 65 and 74 in 2007 was
Become a super saver.
It's feasible to accumulate a large 401(k) balance within a decade if you do some serious saving. For example, a 55-year-old who has no retirement savings and earns
Take advantage of tax incentives.
Workers age 50 and older can contribute up to
Consider delaying retirement.
You can get by saving less each year if you're willing to delay retirement. Consider a couple, both age 50, currently earning
You don't need to save enough to finance retirement entirely on your own.
Downsize retirement expenses.
Another way to make up for a lack of savings is to downsize your retirement expenses. Paying off a mortgage before retirement can significantly cut your housing costs. Some retirees also downsize into smaller homes or condos and pocket the extra cash, curb or sell one of their cars, or employ other frugal strategies to significantly decrease their cost of living in retirement. But watch out for new expenses in retirement including travel, leisure activities, and increasing health care costs as you age.
Factor in a part-time job.
If you're willing to work part time in retirement, you don't need to save as much, assuming you can find and keep a job. Just over a quarter of Americans between ages 65 and 72 were still working in 2008, according to the
Don't chase returns.
Some people who haven't saved enough for retirement try to invest their way to their retirement goals. But the risk of failure using this strategy is high. "You really shouldn't take on additional risk and try to make it up that way," says Long. "There's no way you are going to be able to make some smart investment and play the game really well and make up for not saving." Chasing returns generally hasn't paid off for investors over the past decade, according to recent Fidelity 401(k) data. What has boosted 401(k) account balances is long-term participation in a retirement account, a diversified portfolio, and obtaining an employer match.
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Personal Finance - Retirement Savings Strategies for Late Starters
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