What to do if you’re 55 and just started saving
If you’re age 55 and just started saving for retirement, you’re not alone. Not everyone starts saving money in their 20s, 20s and 30s, and even if you start saving in your 50s, there is time to build your savings.
Strong financial discipline combined with good money habits can help you retire on track, especially when it comes to Social Security and other types of money. Here’s how to get started.
Host mode: Increase your donations
One of the best ways to get retirement savings is by making a large contribution – or as much as possible up to the limit – to your retirement accounts (IRA). These accounts allow for additional Catch-up contributions for anyone age 50 or older.
The more money you contribute to retirement accounts, the more you get to cash in on the tax benefits that come with it. While traditional retirement accounts require you to pay taxes on withdrawals, your money is tax-deferred, and there’s a good chance you’ll have a lower tax rate in retirement. That’s because tax rates are based on your income, and if you’re unemployed when you withdraw from your account, your income will be lower.
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Eliminate high-interest debt
Even if you’re in debt, it may make sense to continue contributing to your employer-sponsored retirement accounts until the employer pays, if any. It’s basically free money. But after upping your employer game, it’s time to prioritize paying off high-interest debt.
Debt can make it more difficult to build wealth because part of your money has to go toward paying interest. Credit card debt tends to go astray with high loan amounts. Try to cut your expenses so you have more money to throw at your debt, and review past credit card statements to see if there are any areas where you can cut back on your spending.
Canceling unused subscriptions and reducing your discretionary spending can speed up your progress. The sooner you pay off high-interest debt, the sooner you can invest more money in your investment accounts.
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Expand with Upskill
Increasing your income can help you retire sooner. While you can’t control how your assets will perform over time, you can increase your income by pursuing new opportunities. You may want to develop new skills, choose explosives or pursue career advancement to make this happen.
Diversifying your skills can also make retirement easier. This retirement model involves working part-time in the retirement years instead of leaving the workforce altogether. Semi-Retirement gives you another period of time after you may want to retire, and you can pursue a long-term career.
Retirement can also provide you with enough money to cover your living expenses and allow your portfolio to grow. You may be able to contribute to your portfolio during retirement. Committing to a temporary gig for a few years means your nest egg won’t stretch for many years, increasing the chances that your portfolio is big enough to see you through to full retirement.
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Focus on improvement, not perfection
It is impossible to go from zero savings to a fully grown nest egg in one year, because it takes time to build a portfolio. But you can make progress little by little day by day.
Celebrate the small steps you can take on the road to long-term financial goals. Accept small wins like canceling unused subscriptions, learning a new skill that can turn into a side hustle and asking your employer for a raise. These actions add up, and while you may not see the fruits of your labor immediately, they can be seen after a decade.
