Experts agree everyone should start saving for retirement as early as possible, but those approaching age 50 without saving for their golden years are facing a full-fledged financial emergency.
The good news is it’s never too late to get your retirement on track – even at 50.
“Saving and building a nest egg is a lot like trying to lose weight – there are no shortcuts,” says Owen Murray, director of investments for Horizon Advisors. “[People] have to spend less and save more. It is necessary to change their behavior and to stick with the changes.”
The majority of Americans retire between ages 61 and 65, according to LIMRA Secure Retirement Institute. Even at age 50, Americans have a 15-year window to get all their financial ducks in a row and still retire by age 65. While that window may not be large enough for everyone to get where they need to be by 65, taking full advantage of the opportunity can make the difference between retiring at 68 or retiring at 80.
At the same time, just because some people may not be able to get fully prepared for retirement in 15 years doesn’t mean they should be discouraged from doing whatever they can. Garrison Urette, president of Garrison Asset Management, says anything people can do to prepare for retirement is better than doing nothing. It’s also important to be realistic about expectations.
“Because of the delay in saving, it often makes more sense to delay retirement,” Urette says. “If they were hoping to retire soon, I would strongly suggest they revisit that idea.”
In terms of making the most out of those retirement savings by investing them, he says most 50-year-old investors can still comfortably take on a certain amount of investing risk.
“In general, I would expect someone in their 50s to have at least a 25-year time horizon and thus be able to have a well-diversified portfolio that takes on a moderate level of risk,” Urette says.
Another way to look at the predicament of starting retirement savings at age 50 is to adjust retirement lifestyle expectations, says Jeff Carbone, managing partner for Cornerstone Financial Partners.
“I will start the conversation with the client by helping them to understand it is not only what you have that makes a difference but what you would spend or expect to spend in retirement,” Carbone says.
By breaking down the costs associated with a lavish retirement lifestyle, clients often get a reality check about how serious the situation actually is.
In terms of making up for lost time, Carbone says pretax savings accounts can be a client’s best friend.
“First and foremost, make sure to maximize the company savings plan [i.e. 401(k), 457, etc.],” he says.
But no matter how much retirement-savers cut spending and adjust retirement lifestyle expectations, a 15-year window may simply not be long enough for all savers.
According to Antwone Harris, a senior financial consultant for Charles Schwab, starting from scratch at age 50 would require the average person to set aside roughly 60 percent of his or her income to retire at the typical age.
“According to the Schwab Center for Financial Research, your retirement portfolio should be 25 times larger than the amount you expect to withdraw from it in your first year of retirement,” Harris says.
People who can’t afford to save that much of their income may need to think outside the box about retirement.
“Many people are retiring later in life these days to build a bigger retirement portfolio or working part time during retirement to supplement their savings,” Harris says.
For people who find themselves in the unfortunate situation of having no retirement savings at 50, another obstacle to overcome may be a mental one. There’s no sense in dwelling on missed opportunities, but there’s also no time to waste in getting started on an emergency retirement savings plan.
“People too often lament their fate rather than taking action,” says JJ Kinahan, chief strategist for TD Ameritrade.
“Viewpoint is everything in these situations,” he says. “Rather than looking at it like you don’t have enough time, set a realistic goal of what you can do in the time available.”
The idea of delaying retirement, making dramatic lifestyle changes or working part time after age 65 may be…
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