So you left planning for your golden years in the middle of the century — don’t worry. You’re not the only one.
Nearly one in four baby boomers said they didn’t start saving for retirement until they were 50 – and more than a third still say they have no retirement savings, according to a 2022 survey by mortgage news website Anytime Estimate.
You still have options, so prepare now to reach your retirement goals.
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Pay off your debts
Before you start setting aside funds, make sure you have settled or have a plan to settle all your debts.
It could be credit card debt, the mortgage on your home, or your student loan balance.
You don’t want to keep racking up interest charges while trying to save, especially with rates as high as they are now. Credit card interest rates have already hit record highs this year after the Federal Reserve’s latest interest rate hike.
If you have multiple lines of credit to manage, consider your options and start reducing your debt. You can try negotiating with your lender or consider a debt consolidation plan that keeps you on track and with a lower interest rate.
Find the right investment vehicles
Does your employer offer a 401(k) plan? Or do you get tax breaks with an IRA?
If you don’t have a 401(k) through your employer, consider opening an IRA or a Roth IRA. Decide which option is right for you and start transferring funds into your preferred retirement vehicle.
READ MORE: Here’s how much the average 60-year-old American has in retirement savings – how does your nest egg compare?
401(k) vs. IRA vs. Roth IRA: Which is Best for You?
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401(k): This retirement plan allows you to divert part of your pre-tax salary to a 401(k), so you reduce your taxable income – the higher your income, the greater your tax savings. And your money grows tax-free until you make withdrawals in retirement. Your employer may also offer matching contributions.
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Traditional IRA: A traditional IRA gives you the ability to contribute “pre-tax” income and allow it to grow tax-free until you make withdrawals in retirement. However, your contribution limits are lower than they would be in a 401(k).
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Roth IRA: This vehicle allows you to pay taxes in advance on your contributions. So when you withdraw the money in retirement, your withdrawals and earnings are generally tax-free. However, you are only eligible for this account based on your filing status and income threshold, as determined by the IRS.
Once you reach age 50, you can also start making annual catch-up contributions. You are allowed to contribute up to $7,500 into a 401(k) and up to $1,000 into an IRA this year.
Find alternative sources of income
Instead of just hiding some money from your paycheck in your retirement account, consider investing it instead.
Although the stock market is falling, this could be a good opportunity to buy stocks while they are cheap. Consider building your portfolio with sectors that traditionally perform well through economic cycles, such as healthcare, utilities, and consumer staples.
Another option is to work overtime with a side hustle, so you can save the extra money in savings or investments.
Research from jobs website Zippia found nearly half of Americans had hustles in 2022 — and while older Americans aren’t as likely to have them, those who tend to have them make more money.
Americans between the ages of 45 and 54 earned $892 per month from their secondary activities, while those between the ages of 55 and 65 earned about $1,061 per month on average. Popular options may include renting out a property you own or reselling items on eBay or Amazon.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.