Are you in your 50s and starting to think about retirement? You’re not alone! Saving for retirement in your 50s can be daunting for many people like you. It’s never too early or too late to start saving for your future. But with so many options out there, it can be overwhelming to know where to begin.
That’s why this post puts together 8 of the best ways to save for retirement in your 50s. Check them out!
8 Best Ways to Save for Retirement in Your 50s
Whether you are starting out or have been saving for years, these 8 tips will help you make the most of your retirement savings. So, let’s dive in and explore the options!
- Establish a Health Savings Account (HSA)
An HSA is a type of tax-advantaged savings account that can be used to cover certain kinds of medical costs. In order to make contributions to an HSA and benefit from the tax advantages, you must be enrolled in a high-deductible health plan (HDHP).
Your HSA contributions are tax-deductible, and your gains grow tax-free. In addition, withdrawals for legitimate medical costs are tax-free. You can lower your medical expenses and have more money to put towards retirement savings by making an HSA contribution.
What is Self Directed 401K or Solo 401(k) Plan?
- Obtain Money From Other Sources Apart From Investments
While investing is integral to retirement savings, it’s not the only option. There are other ways to obtain the money that can be used to save for retirement. For example, you can sell assets you no longer need or want, such as a second home or a boat.
And why only think about how to save for retirement at 50? You can also consider earning additional income through a part-time job or side hustle that can be put toward retirement savings.
- Take Part in 401(k) and Other Retirement Plans Offered by Your Employer
If your employer offers 401(k) options and other retirement plans, take advantage of it. These plans allow you to save money for retirement on a tax-deferred basis, meaning you won’t pay taxes on the money until you withdraw it in retirement.
Some employers even offer a matching contribution, which is essentially free money. Be sure to contribute enough to take advantage of the full match. If you’re self-employed, you can set up a solo 401(k) or a Simplified Employee Pension (SEP) plan.
- Set Sensible Objectives
When it comes to saving for retirement in your 50s, setting sensible objectives is critical. You need a clear idea of how much money you need and how much you can realistically save each year. You may need to adjust your retirement timeline or lifestyle to achieve your goals. Don’t forget to factor in the following when setting your objectives:-
- Healthcare costs
- Potential market fluctuations
- Any retirement benefits you will receive from social security or a pension plan
- Clear Your Mortgage
One of the biggest expenses for most people is their mortgage. If you are still carrying a mortgage into your 50s and beyond, it’s time to think about paying it off. Not only will you save thousands of dollars in interest, but you’ll also free up more money for retirement savings.
Imagine how much more you could save each month if you didn’t have a mortgage payment hanging over your head!
- Maximize Your Social Security Benefits
Social Security can be a major source of retirement income for many people. But did you know that you can maximize your benefits by delaying your claim? Every year you delay claiming Social Security, your benefit will increase by around 8%.
So if you can afford to hold off on claiming until age 70, you’ll receive a much larger monthly benefit than if you claim at 62.
- Utilize the Catch-up Contributions
One of the best ways to save for retirement in your 50s is to make catch-up contributions to your retirement accounts. This means you can contribute more than the standard limit and make up for the lost time.
For instance, the maximum amount a younger worker can add to 401(k) is $22,500, and for IRA, it’s $6,500 starting in 2023. However, if you’re 50 and above, you can contribute up to $30,000 in 401(k) and up to $7,500 in IRA.
- Consult a Professional
Finally, it’s always a good idea to consult a financial professional regarding your retirement planning. A professional can help you create a personalized plan based on your unique situation and goals.
They can also help you navigate the complex world of retirement accounts, tax laws, and investment options. Don’t be afraid to ask for help – it’s a smart move that can pay off in the long run.
In conclusion, saving for retirement in your 50s may seem daunting, but there are plenty of strategies you can use to help secure your financial future. You can work longer, downsize your lifestyle, or invest in a mix of stocks and bonds. With a little bit of effort and discipline, you can set yourself up for a comfortable retirement and enjoy the fruits of your labor.
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning. Over the last 10 years, he has turned his focus to self-directed accounts and alternative investments.