It’s the same old story: you’re going about your everyday routine and then all of a sudden retirement comes into focus. Turning 50 and not having anything put away for retirement leaves you breaking out in a sweat at night as you try to fall asleep.
You envisioned leaving work at an age when you could actually enjoy your life, but without a pension to look forward to, the realization that you will have to work until you simply can’t hits you like a ton of bricks. But could it be possible to build a sufficient retirement nest egg if you don’t start saving until age 50?
What You Should Consider
The first question you need to ask is what sort of lifestyle you foresee yourself living in. Will you do lots of traveling? Will you constantly dine out and see a new broadway show every weekend? Some people live comfortably on $30,000 a year, but for others, even a $250,000 income would cause a major struggle to maintain current living standards.
Your Retirement Age
The next question is when you plan to retire. This is important because if you plan on retiring at age 99, and think you will die at age 100, you can live like a king for one whole year! But you will probably live a decade or more and will need to plan accordingly.
How to Begin
Your spending habits will probably have to change drastically. The priority has to be saving for retirement, no matter what your retirement lifestyle and age will be. A family meeting should be held to make sure everyone understands the situation.
Your children will need to get on board with the new plan as well. By the time you retire, they may have families of their own to take care of, and their own retirements to consider. Your children may not be elated about this, but skipping the movies every week isn’t a tremendous sacrifice.
Beyond maxing out your contributions from here on out, take advantage of the catch-up provisions available to federal employees ages 50 and over. If you can save more than that, consider making non-qualified contributions to an IRA. The money will grow tax-deferred until you start having to take it out at age 70 ½. Save, save, save!
Internal Rate of Return
If you were to max out your contributions (including catch-up contributions) from age 50 until you retire at age 65, and assuming contribution maximums increase $500/year for both contributions and catch-up levels, your total contributions would equal $390,000.
If you add a yearly internal rate of return of 6%, your total retirement nest egg at retirement would be $584,279. Assuming you live until age 100, and a continued rate of return of 6%, you could withdraw $38,018.86 each year to live on.
Is it Enough?
Will $38,018.54 plus each year be enough for you? Take stock of your situation and do the math today. It may not be where you would like it to be, but it is probably not zero. Now is time to shift your retirement nest egg into overdrive.
Remember, your priority from here on out should be to put money away for retirement. You may even want to consider taking a part-time job to supercharge the process.
Consider working with a financial planner to guide your efforts and to assist you with making prudent investment decisions on your retirement nest egg.
Lastly, don’t get too discouraged. You may need to keep your job for a little longer than you initially hoped, but with hard work and dedication, you can take hope and know that it’s not too late to save what you need to retire.
At Medallion Financial Group, we believe financial planning is about Family. We have been helping families invest in the future since 1987 through a holistic planning approach. We recognize there are a variety of needs when it comes to retirement planning, plan rollovers, annuities, college planning, life insurance options, and investment management. It is easy to get lost in a sea of choices. Our financial advisors help with the basics and beyond to enable our clients to get the education, advice, and management they need to retire with confidence.
Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.
We strive to exceed client’s expectations – because we have high expectations of ourselves.