By Eric Gursky
It is an unfortunate fact that 28% of workers 55 or older have less than $10,000 saved. Those who have waited too long should not grieve about the past and take action as soon as possible. The road to having a retirement will not be an easy one and some sacrifices need to be made. It is a lot harder to start saving after 35 but even when this is the scenario, people still need to come up with a magic number or the amount they want to acquire by retirement. For example, someone who is 55 years old and earns $40,000 a year would need to save 27% of their income to be able to retire at 65.
Those who have waited to retire now need to put away as much as they can. To be in the position to put away more money, a person may have to relocate to find a higher paying job, pick up an extra part time job, and cut other expenses. Some suggestions for cutting expenses include selling your house to rent, selling off excess property you don't need, and eating at home instead of dining out. Other recommendations lean towards working until 70 because it gives you more time to save and your actual retirement length will be shorter. Along with working longer comes the option of waiting to receive social security. If you wait until your full retirement age, the social security benefit will not be reduced. This reduction can reach 30% if you choose to take it early. There is also an option to delay your benefit until after your full retirement age which can increase it by up to 8% a year.
For specific retirement options, it is still not to late if you are 50 or older to start an IRA. Even though you will not be able to take full advantage of compound interest, the money can still experience nice growth before being tapped. People over 50 who are saving in a regular or Roth IRA can save an extra $1,000 a year bringing the total allowed savings to $6,000 annually. Likewise, individuals who are 50 and over that have a 401k can save an extra $5,000 a year making the maximum contribution $20,500. While IRAs and 401(k) plans have tax deferred growth, the Roth IRA has tax free growth. While these are great options, you actually need to be making the money to save. For those who can't, social security should not be underestimated and may replace up to 25% or more of your current income.