How To Save For Retirement In Your 50’s: It’s Not Too Late!

Once upon a time, turning 50 meant that retirement was right around the corner. Yet the 23rd edition of the Transamerica Retirement Survey of Workers found that many members of Generation X aren’t planning to retire before age 70, if at all.

If you’d prefer not to work indefinitely but still want some advice on how to save for retirement in your 50’s, we got you. The following tips can help you assess your current situation, set realistic goals for retirement and take steps to meet them.

Gen X Faces Retirement Challenges

Almost a third of Gen Xers have saved $250,000 or more for retirement, according to the Transamerica study. If you were born from 1965 to 1980, that’s not a bad nest egg.

Another 15% of them have saved $100,000 to $250,000. But the median total household retirement savings was just $82,000. And another third of this group had saved less than $50,000.

Chances are no matter how much you’ve saved for retirement, you’re wishing you had more.

Generation X entered the workforce at a time when 401(k) plans weren’t as widespread as they are today, and IRA contribution limits were far lower—even after adjusting for inflation. Roth IRAs didn’t exist yet. Even basic investment and personal finance advice wasn’t nearly as accessible!

You may not have had the chance to get the same jump start that younger workers did. But enough with the excuses. Now’s the time to stop feeling financially insecure.

1. Envision Your Retirement

If we know anything about personal finance, it’s that telling people to do the logical thing doesn’t always work. What we do with our money is often emotional and irrational, so each step in creating a retirement savings plan should acknowledge this fact.

Consider what a good retirement looks like for you. What inspires you—or scares you? What do you want badly enough in the future for which you’re willing to sacrifice today?

Maybe you’ve seen older relatives who were not able to retire. Perhaps you have a friend your own age or younger who’s one of those FIRE people. You’ve probably gotten a second-hand look at what your 60s, 70s and beyond might have to offer, depending on your health and finances.

Think about where you see yourself living, who you see yourself spending time with. Consider how you might spend a typical week and what special experiences you want to create.

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No, you don’t need to make a vision board unless that’s your thing. But write down some goals. Talk to your non-pessimistic friends about it. Make it seem real.

2. Re-evaluate Your Expenses

Now that you have a better picture of how retirement might look, the next step should feel more like planning for something fun and less like preparing for deprivation.

Do your future self a favor by taking a long, hard look at your finances. Thanks to technology, there are dozens of apps that can make short work of the task.

Link your financial accounts to a budgeting app like Mint, Rocket Money or You Need A Budget. None of them are perfect, but they should be able to tell you exactly where your money is going.

There are two big reasons to get a detailed look at your current expenses:

  • To estimate how much annual after-tax income you’ll need in retirement if you want to maintain your current standard of living.
  • To see how much money you are spending on things you don’t really value. Redirect these funds to savings.

You might find recurring subscriptions you barely use, services you haven’t price-shopped for in ages (how much is your cell phone bill?) and at least one category of “Oh my god, I can’t believe I’ve spent so much money on that!”

The purpose of this exercise isn’t to shame you for your past expenses, it’s to make them obvious to you so you can reprioritize your spending habits on things that actually matter to you.

3. Make Catch-Up Contributions

Redirect the spending you’ve cut toward retirement account catch-up contributions, or regular contributions if you aren’t already maxing them out.

Most tax-deferred retirement accounts offer people who are 50 or older higher contribution limits. These include 401(k) plans, individual retirement accounts and the like. Contributions to these types of accounts grow faster when your earnings aren’t getting taxed every year.

Let’s say you max out your annual contributions. Once you turn 50, catch-up contributions let you save an extra $7,500 in a 401(k), $1,000 in an HSA and an extra $1,000 in your IRA. Yes, you can do both. So can your spouse, if you have one.

4. Keep Investing in Stocks

Loss aversion makes people afraid to screw up what they already have. It’s why some people keep their money in savings accounts instead of the stock market.

The trouble is loss aversion can really hurt your ability to save for retirement in your 50s if you’re too conservative and don’t give your savings enough growth potential.

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Most people—even retirees—need to accept the additional risk that comes with stocks to outpace inflation and taxes and actually grow their nest eggs. But that doesn’t mean you should put all your money in Tesla and Bitcoin.

A better strategy might be to allocate 70% of your retirement savings to an S&P 500 ETF. You’ll be investing in the world’s most successful companies, but you’ll also be diversifying across hundreds of stocks and minimizing your investment fees. The other 30% of your portfolio might be in various types of bonds.

Talk with a financial advisor to get a personalized breakdown of where you should be investing your money to be able to have the retirement you want.

5. Stop Letting Banks Rob You of Interest

If you’re in your 50s, you probably had well-established banking habits and relationships by the time high-yield online savings accounts came around.

You may still be with those banks because of status quo bias, an illogical behavior that causes us to stick with what we know instead of reconsidering whether it’s still the right choice.

If your savings is sitting in a bank account that’s paying 0.02% interest, you’re getting taken advantage of. Without taking any additional risk, you could be earning far more.

In December 2022, the Wall Street Journal estimated that Americans had lost out on $291 billion in interest since the beginning of 2019 by sticking with the country’s largest commercial banks.

There are few opportunities in personal finance where this statement is true, but with high-yield savings accounts, you’re getting the same amount of FDIC deposit insurance and, in 2023, earning an APY of at least 4%.

There’s just no contest between traditional and high-yield savings account rates. You need to keep your savings safe from inflation, and 0.02% isn’t going to cut it—not even if the Fed gets rates back down to 2%.

6. Get Rid of Expensive Debt

America’s pastime used to be baseball. Today, you can order a custom Tesla online in less time than it takes to get three outs—even with the pitch clock. It’s no wonder America’s 50-somethings were carrying over $3 trillion in consumer debt in the first quarter of 2023.

According to the Federal Reserve Bank of New York, most of that debt comes from mortgages. It’s okay to carry a mortgage into retirement—that’s probably your lowest-interest debt.

What you’d really like to avoid is letting high-interest credit card debt derail your plans. In May 2023, the average interest rate on credit card debt was over 22%. There’s no better return on your investment than knocking this debt out. One strategy for doing that is to transfer your balance to a 0% APR card, then quickly pay it off.

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7. Balance Obligations to Others

Many people in their 50s are still raising school-aged children or provide some level of support to their adult children or parents. You want to take care of your family, of course. Or you don’t, but you feel obligated.

Your dedication is admirable, but beware of making too many sacrifices. You have to take care of yourself, too. We’ll leave the emotional stuff to your therapist. As for the financial aspect of caring for others, you need to make sure you can cover your own bills, debt payments, emergency fund and retirement savings first.

Your adult dependents can borrow money, sell assets, work more, cut their expenses, get better insurance, qualify for public benefits and otherwise exhaust all their options for paying for their own lives before you chip in.

When it comes to caring for minors, don’t sacrifice your retirement for their college savings. They can take out student loans to pay for school, you can’t take out loans to pay for an unexpected early retirement after a layoff.

8. Put Past Mistakes Behind You

It’s not unusual to reach your 50s and regret that you didn’t save more when you were younger and had more time for investment returns to compound.

It’s also not unusual to let your feelings get in the way of making rational decisions about money. Thoughts like “I’ve already spent so much money or time on this thing” or “this is the way I’ve always done it” cause us to hang on to losing investments, self-interested advisors, overpriced financial products and mediocre savings accounts.

Don’t let stubbornness or shame prevent you from making the most of the decades to come. And don’t be afraid to ask for help.

Consider having a fee-only fiduciary financial planner review your investments, your insurance policies and other aspects of your finances. They can suggest areas for improvement that won’t benefit them financially. You can pay them a flat fee or hourly rate.

You’ve been smart enough, lucky enough and resilient enough to make it to your 50s. However much or little you’ve accumulated, however many good or bad decisions you’ve made up to this point, you’ve still got time to make meaningful progress toward a financially stable retirement. You can do this.