One of the main concerns some people have once they reach the age of 50 is their retirement savings.
After all, at that point, there are roughly 15 years left to save up. However, it’s never too late to intensify your savings effort and build your retirement fund.
The Importance Of Saving For Retirement
It might seem like there’s no need to save up at your age. You’d think that with the decades you’ve worked, the social security and pension payouts you’ll receive should be enough. However, they usually aren’t. Even with government and employer payments during retirement, you’d still need 60% of your working income to live comfortably.
A savings fund provides you with more options for what you can do after you retire. If you choose to live with your children, you can do so without being a financial burden. A dedicated retirement fund can also allow you to do activities you’ve always wanted.
Lastly, building your wealth can keep you from racking up debt. You’ll still need to spend on your necessities and wants without an adequate income. However, a retirement fund can give you a cushion without relying on loans.
How To Save For Retirement?
Saving up is an essential habit even in your 50s. Yet, it may still feel daunting, especially if you’re only starting from scratch. However, with the following practices, you’ll be able to start saving for retirement and enjoy your post-working life.
1. Create a financial plan
Identifying your savings options is the first step you should take. Start with the basics, which is to budget your finances. A budget plan can help you manage and prioritize your savings and expenses. Your goal is to build your savings, so try to minimize unnecessary costs.
Planning your investments can also help build your retirement fund. Begin by identifying your risk appetite to help you determine what type of investment vehicles to choose. Since your objective is to build wealth, low-risk investments like treasury bonds, albeit with small returns, can still benefit your savings growth.
By planning your finances, you eliminate most of the guesswork. You’ll have a solid foundation on which to base your future decisions on, making your financial journey more efficient.
2. Leverage other savings sources
Other than salary savings, other sources can contribute to your retirement fund, including social security and employer pension payments. Consider these when planning your finances and managing your fund to help estimate how much you’ll be saving.
Also, ask your employer about personal pension plans, such as the 401(k) in the U.S., which provide employees with investment gains. These income vehicles often provide relatively small payouts. However, they can still help grow your retirement savings, which is why leveraging as many income streams as possible is crucial.
3. Clear and avoid debts
If you want to maximize your retirement funds, you can’t afford to carry student loans, mortgage payments, and credit balances into your retirement. So, leverage your remaining working years into clearing out your debts.
With the bit of working time you have left, it’s essential to be quick and efficient in getting out of debt. You can do this by listing down every debt you owe and prioritizing payments in your budget. It might initially result in zero savings, but once you’ve cleared everything out, you can finally build your retirement savings without any looming debt.
Moreover, it’s just as essential to avoid unnecessary debts in the future. While some debts like car loans and mortgages are often needed, you should avoid credit card balances and personal loans. These are unnecessary and may throw you back to square one if they accumulate.
4. Invest in health and long-term care
As you grow old, your health becomes more of a concern. Hence, especially at 50, investing in your health should be one of your top priorities. After all, you wouldn’t want to drain your retirement savings on medical expenses and hospital bills.
Investing in health insurance ensures you have a financial cushion during medical necessities. Depending on the policy, insurance can cover medical expenses, from appointments and medications to laboratory tests and surgeries.
More importantly, most health insurance policies, especially those for the elderly, provide coverage for critical illnesses such as cancers, strokes, and heart attacks. Health insurance ensures your retirement savings remain mostly untouched during medical needs, helping your fund grow and giving you a healthy retirement lifestyle.
5. Don’t touch your savings and benefits
Even with insurance, there are instances when you exceed your maximum annual benefits. You’d have to pay for the excess out of pocket. However, it’s important not to touch your retirement savings to ensure it continues to grow.
In this case, it’s helpful to have a budget dedicated to building an emergency fund, which typically covers 3 to 6 months of necessary expenses. This fund allows you to finance unexpected costs without deducting anything from your retirement savings.
Moreover, avoid withdrawing your social security benefits prematurely, even if terms and conditions allow it. Although it’s a relatively small amount, keeping your contributions growing as long as possible maximizes the amount you’ll receive from social security.
6. Hire a financial advisor
Saving for retirement can be a difficult habit to get into, especially in your 50s. Even with proper planning, it can still be a taxing and time-consuming process for many people. Thankfully, you can hire a financial advisor and make the job easier.
Having an advisor can help you determine the savings options you can avail of and how to use them effectively. They can also assist you in managing your debts and insurance policies.
While financial advisors can sometimes be costly, some may allow you to work with them on a one-time basis. This option is beneficial if you need assistance with starting your fund. Hiring an advisor to develop a long-term and sustainable financial plan can be an excellent start to reaching your retirement savings goals.
Make Your Retirement Worthwhile
Retirement is the reward for your decades of hard work, but it can be less fulfilling if you’re constantly worried about money by then. Planning and managing your finances even in your 50s minimizes your risk of having little to no money to your name, especially when it matters most.
It’s important to remember that retirement isn’t a weekend trip—it’s a period that lasts for decades. So, having the money to support your needs and wants without relying on others can make your retirement worthwhile.
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Author Bio: Bert is a Certified Public Accountant and a Managing Member of Aura Wealth Advisors. As a CPA, he brings expertise in not only building and preserving wealth but also addressing tax-related issues his clients face.