What should I have saved for retirement at 50?
So now you’re 50. The big five-o. If you hadn’t already had the shock that you should probably start saving more for retirement, you definitely have now. Sixty-five, the traditional retirement age, is a mere 15 years away.
Questions are reeling in your head:
Have I saved enough?
Is it possible to catch up if I’m behind?
These are important things to think about, but take a deep breath and start at the beginning. First, see where you stand.
What should you have saved for retirement at 50?
Really, how much money you need saved depends on your current income and expected standard of living in retirement.
For example, say you make $150,000 a year. You plan to downsize a bit and live on 75% of your pre-retirement income, so $112,500 a year. You expect to live 10 to 20 years post retirement, so you’ll need $1,125,000 – $2,250,000 in total savings, social security, 401K, etc.
If you planned to put away 10% of your annual income over the next 15 years, that means you’d already need $900,000 saved up. Ouch.
There are a lot of calculators and guidelines out there that will offer more advice on how much money you should have at this point.
JPMorgan Asset Management’s annual Guide to Retirement says a 50 year old should have $1,240,000 saved already if they make $200,000 a year. Financial Samurai’s 401 K retirement savings guide says a 50 year old should have between $480,500 and $1,200,000 invested in their 401K.
I know for a lot of 50 year olds, these stats and guidelines aren’t very helpful. You probably don’t have anywhere near this kind of savings, that’s why you’re reading this post.
And you aren’t alone. According to USA Today, 41% of people 55 to 64 years old have zero retirement savings whatsoever.
So now you can move on to the next big question:
Is it possible to catch up?
Luckily, the answer is still yes.
Rein in spending
If you’re over 50 and have little or no retirement savings, you’re going to need to save a lot more than 10% of your annual income to catch up. So act now to rein in spending.
Downsize before retirement by cutting back on major expenses, like your extra vehicle, cable bill, or annual vacation. Find even the smallest ways to reduce your bills — it can add up to a lot over time.
Be realistic though, cutting back is always a good idea, but there is a limit on how much you can cut. You can’t save your way to prosperity when you reach 50!
Take advantage of catchup contributions
If you’ve under-invested in your 401K up until this point, now’s the time to take advantage of catchup contributions. In 2016, you can invest a limit of $18,000 to a 401K, But if you’re 50 or older, you can add an additional $6,000 per year. Take advantage of it.
401K contributions are great forced savings and doubly awesome when you get a corporate match!
Broaden your income horizons
If you really want to protect yourself and your family in retirement, you need to start exploring alternate sources of income. Smart investments or a side business could be the saving grace that brings in the extra income you really need to make your retirement happen.
When you really ask the question: What should I have saved for retirement at 50? You face a big problem head on. This is the first, scary step you can take to developing a plan to overcome your retirement problems. The only real way to secure your retirement is to add other incomes streams. Here is a good first step to take.
Ian Bond is a private banking senior executive with over three decades of experience in wealth and asset management with Goldman Sachs, Credit Suisse, and Citigroup. He has built major businesses on four continents.
Despite his professional responsibility for assets over $100B and revenues over $1B, after the 2008 crash Ian was personally going broke. Within five years he destroyed his debt, became an expat in 2014, and built multiple streams of income to fund his imminent retirement. Ian is also the founder of MyRetirementRehab.me created to help other executives and professionals rehabilitate their finances and make a prosperous, enduring retirement a reality.