Senior couple on desert road sitting on motorcycle
You’ve probably heard all your life that you need to save more for retirement. You had good intentions, but life events caused you to dip into those savings, and now you worry you might not have enough for retirement. Now in your 50s, it feels like you’ll never save enough to live comfortably in your retirement years.
While it’s true you won’t get the same savings benefit as a 20-year-old, there are steps you can take to improve your situation. You still have several working years ahead, and you’ll need to adjust both your budget and your mindset.
Create a Financial Plan
Retirement at 65 isn’t too far off for those in their 50s. You might think a financial plan won’t make a difference, but it will. Treat your retirement plan like a roadmap.
Part of this plan should include a budget. List all your expenses and income, then find areas where you can cut costs. Try to maximize your income, giving you a one-two punch that can help with saving.
Don’t factor Social Security into your plan. Project your living expenses without it. If you can live without this money, it will be a bonus when you start collecting it.
Eliminate Your Debt
While this article isn’t about debt, it’s crucial to mention eliminating it when discussing savings. Plenty of advice is available online to help you incorporate this into your overall plan. Once you’re out of debt, your savings will grow quickly.
Learn How to Invest
People over 50 don’t have the luxury of recovering from bad investments. You could hire a financial adviser, but if they’re incompetent, you’ll be worse off. Learn how to invest yourself. Many online resources can help you with investment fundamentals. Avoid techniques promising instant returns and focus on those advocating a longer time horizon.
Passively-Managed Investing
One way to avoid learning investing is to set up an automated monthly contribution into an S&P index fund. It’s tough for most people to beat the S&P 500’s performance over the long run, including money managers. Stocks are mean-reverting; some may perform well short-term, but most will follow the index over a longer period.
Income Diversification
Investing in stocks has its risks, as seen in the financial crisis of 2008. While younger people can recover, those over 50 cannot. Diversify your income streams to navigate future economic downturns.
One fast way to grow wealth and diversify investments is by becoming a landlord. While some financial gurus argue that stocks outperform real estate, they often don’t account for rental income. When you factor in this income, real estate can be a clear winner.
Rental income is a great way to earn passively, but be cautious not to overextend. Some real estate moguls suggest using current properties as collateral for future deals. However, if you over-leverage and something goes wrong, it can unravel quickly. Leverage works well when it’s in your favor but can destroy your wealth if it’s not.
Forget the Hail Mary Pass
In football, a Hail Mary pass is a long shot to score when time is running out. It rarely works. Similarly, after building up savings in your 50s, you might be tempted to make up for lost time with riskier investments. While the payoff could be huge, the downside is losing most of your new savings, leaving you with even less time to recover.
Other Considerations
If you’re over 50 with little saved for retirement, maximize your earning potential. You might need to work longer than if you had saved earlier. Consider continuing to work even after declaring retirement. If your property taxes are high, think about downsizing or moving to a tax-friendly state. Some states don’t levy state taxes, and property taxes might be lower.
All is not lost if you’re over 50 and haven’t saved much. You can still grow your money with discipline, dedication, and sacrifice. The rewards will be worth the effort.