Is it too Late to Start Saving for Your Retirement?

According to a 2022 report by the United Census Bureau, almost 50% of adults aged 55 to 66 have no personal retirement savings. Many among that population might feel they’ve lost out on their opportunity to secure their financial futures, but that’s not necessarily the case. Even if you’re in your mid-to-late 50s, you can still build sufficient savings and wealth to fund a comfortable retirement. Consider these three tips to help you catch up on your retirement savings and maximize your retirement income. Remember, it is never too late to start saving for your retirement.

Max Out Your 401(k)

If your employer offers a 401(k) plan, it can be your key to a well-funded retirement. The idea is to max it out, which means contributing the highest possible amount per year. For some people, that would be the legally defined contribution limit, which is $30,000 for people aged 50 or older as of 2023. For others, it could mean as much as they can personally afford to deduct from their monthly paychecks. In either case, maximizing your contribution amount allows you to accelerate the growth of your retirement savings by taking advantage of compound interest.

To illustrate, imagine that you’re a 55-year-old employee who earns $90,000 per year, hopes to retire by age 67, and currently has $0 in your 401(k) balance. If you can start contributing 20% now — $18,000 per year, or $1,500 per month — and your account grows by 7% every year, you can expect to have more than $334,000 saved up by your target retirement age. While that may not be enough to fully fund your desired lifestyle, it can certainly make for an easier time of your retirement.

That assumes that your salary doesn’t grow at all, you can’t contribute more, or that your employer offers no matching incentive. If your earnings grow every year, you can increase your contributions, or if a 401(k) match is part of the picture, your savings will increase exponentially.

Consider a Semi-Retirement

Pre-retirees without the means to fund a full retirement may want to consider a semi-retirement, by which they work part-time to offset their expenses. Semi-retirement can take a number of forms. Some semi-retirees arrange to take on a reduced role in their current employment, others pursue a less-involved line of work altogether, and still others take up freelancing.

That last approach, freelancing, could be a particularly enjoyable way to supplement other sources of retirement income. Indeed, if you have any bankable hobbies, earning a partial living might seem less of a duty and more of a way to monetize your interests. If you enjoy writing, for example, taking regular writing gigs can help you keep up with your monthly expenses in retirement. According to PayScale, even the bottom 10% of freelance writers earn an average of $19,000 per year, which would amount to a decent complement to your 401(k) and Social Security checks.

Build Additional Income Streams

Building additional income streams means establishing sources of revenue that either pay out immediately or have the potential to pay out in the future. Having a passive income stream is a great way to help you start saving for your retirement. Here are some examples of common retirement income streams:

A Diversified Investment Portfolio

Stocks, bonds, and other assets can grow in value over time. When you eventually sell them, appreciated assets provide you with more money than you’d initially put in. 

Real Estate

If you can afford to purchase real estate now, the properties you acquire can amount to big income in the future if the housing market continues to grow. Alternatively, you can rent out your real estate to ensure a steady stream of income.

Fixed Annuities

A fixed annuity is a type of insurance contract. When you purchase one, you agree to a contract length and the insurer guarantees you a set rate of return for every year of the term. You then pay into the account in either a lump sum or a series of contributions, and the money grows tax-deferred. At the end of the term, you can convert the appreciated account into a series of regular payments that can last you the rest of your life.

Securing Your Future: The Timeless Importance to Start Saving for Your Retirement Savings Journey Now

Aside from the strategies we’ve discussed above, one of the best ways to secure a comfortable retirement is to develop a sound financial plan. That entails assessing your needs, foreseeing expenses, and setting a monthly budget that protects against common retirement risks. Speak with a financial adviser to build a plan that meets your specific needs so that you can more assuredly secure the kind of future you desire.