No Retirement Savings at 50? Here’s What You Need to Do
Most of us know that it’s important to plan for retirement, but unfortunately, this is easier said than done. The AARP, in a 2024 survey, found that 61 percent of respondents 50 years and older were worried they wouldn’t have sufficient savings to sustain their livelihood in retirement. Moreover, 20 percent of respondents had no savings whatsoever. More than one-quarter of respondents still in the workforce said they didn’t even expect to be able to retire.
While having no savings at 50 years old isn’t ideal, it doesn’t have to mean that retirement is an unrealistic goal. Here’s a look at five things you can do to work toward a more comfortable and financially secure future.
Open an IRA
It’s never too late to begin saving for retirement. One of the most effective ways to begin saving at an older age is to take advantage of compound interest via an individual retirement account (IRA). These savings accounts offer tax benefits and earn interest on deposits through investments in financial products, including mutual funds, stocks, and bonds. Funds cannot be withdrawn before age 59.5, however, without incurring a 10 percent early withdrawal penalty. IRA account holders can contribute up to $7,000 in 2024, and all of that money may be tax deductible, meaning their taxable income decreases by the amount they deposit.
Banks, brokerages, and savings and loan associations are among the financial institutions that can open and manage IRA accounts on your behalf. There are many different types of IRAs, including Roth IRAs and self-employed (SEP) IRAs, and each has different rules regarding annual contributions, taxation, and required minimum distributions (RMDs). Roth IRAs, for example, do not have RMDs, whereas traditional and SEP IRA account holders must start taking RMDs at age 73.
Estimate Retirement Spending and Social Security Benefit
Retirement won’t look the same for everyone. Someone with an annual salary of $100,000 might have more savings than someone of the same age making $50,000 per year, but they might also have more expenses once they retire. Savings goals can also be influenced by lifestyle factors — for example, where you intend to live once you retire, whether you plan on selling your home and downsizing, and travel plans. It’s important to think about the life you want in retirement and the expenses that entails when coming up with a savings target.
According to the Bureau of Labor Statistics (BLS), average monthly expenses of retirees older than 75 was $3,813 in 2021. This includes housing, transportation, and healthcare. This might seem like a lot if you haven’t started saving, but don’t panic just yet. You will be able to cover some of these expenses with Social Security benefits. Workers can start claiming benefits at 62 years old but can increase their monthly payments by as much as 32 percent if they wait until age 70. Every year that you wait beyond age 62 gives you a guaranteed 8% higher benefit, all the way to age 70, when these “delayed retirement credits” stop building. The average Social Security monthly payment was $1,782.74 in July 2024.
Take Advantage of Catch-Up Contributions and any match from your employer if possible
IRA and employer-sponsored 401(k) accounts have annual contribution limits, but those 50 and older can exceed the normal limit via catch-up contributions. The Internal Revenue Service (IRS) has increased catch-up contribution limits in recent years. In 2024, the catch-up contribution limit for an IRA is $1,000 on top of the $7,000 annual contribution, while the catch-up contribution limit for a 401(k) is $7,500 on top of the $23,000 annual contribution cap. These higher caps give older contributors more power to significantly boost their savings. Most employers who offer 401k plans also offer matching funds for all participants. It is always a great idea to grab that guaranteed free money from your employer’s match if at all possible!
Avoid Speculative Investments
As much as you might be tempted to make up for lost time and maximize your savings, it’s best to take a measured approach when it comes to investing. It’s OK to allocate assets in one or two high-risk investments, but your retirement portfolio should be balanced with low-risk complements like dividend stocks, exchange-traded funds (ETFs), and treasury bonds. Speculative investments, like cryptocurrency, carry a high degree of risk and can eat away at your savings, if large percentage losses are incurred.
The maxim “don’t put all your eggs in one basket” applies here — you don’t want to be in a situation where one company’s mistakes bring its stock price crashing down, and with it, a significant chunk of your investment.
Embrace Part-Time Work in Retirement
People today are living longer and more capable of supporting themselves financially into their 60s and 70s than they were decades ago. Because of this, part-time work can be a feasible option for retirees who need to supplement their retirement savings and Social Security benefits. It’s also a great way to stay busy and involved in your local community. If you specialize in a field, you can provide consulting services to clients on a part-time basis. Alternatively, you can apply for seasonal jobs or work in retail. Choose something you enjoy that relates to your hobbies or interests. You can also earn money from any property you own by renting it out for short-term stays on platforms like Airbnb.
