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Knowing how to plan for retirement if you’re late in the game can be overwhelming. To help you get on track, we’ve outlined specific strategies recommended by the experts that will guide you through the process.

Financial advisor meeting with a client

Retirement planning can be stressful, especially if you feel behind. In 2019, a report on the economic well-being of U.S. households conducted by The Federal Reserve showed that only 44 percent of Americans aged 45–59 felt that their retirement savings were on track, leaving 56 percent feeling behind.

Saving for retirement when you’re 50 or older isn’t impossible. It just requires hard work. If you are behind, you’re not alone, and there are resources available to you so you can start retirement planning now. Develop the mental discipline to save, make the most of retirement accounts and use catch-up contribution programs — all of which you’ll learn how to do throughout this article.

1. Determine How Much Cash You’ll Need and When You’ll Retire

Knowing how much money you’ll need to live comfortably in retirement will allow you to see how much and how aggressively you’ll need to start saving. Consider what type of retirement lifestyle you’ll want. Do you want to travel more? Spend more money on grandkids? Or are you more likely to live similar to how you’re living now?

In an email to Annuity.org, Guy Baker, founder and managing director of Wealth Teams Alliance recommended the following for late planners:

"Step up and start saving now. This is going to be hard work. Find a good advisor who can help you answer the three most important retirement questions:
  1. How much capital do I need?
  2. How much more do I need to save regularly?
  3. How do I invest with the highest opportunity for success?"

After anticipating how much money you’ll need, consider the four percent rule. This rule states that if you were to withdraw 4.5 percent from your retirement portfolio in the first year of retirement and then adjust this percentage to account for inflation in the following years, you should have enough for roughly 30 years before running out of money.

For example, if you want to live off of $45,000 each year of retirement, you would need $1 million saved and then some extra to counteract inflation. The four percent rule does have flaws and won’t account for certain retirement risks. For example, you may live longer than 30 years post-retirement. If so, you would need to withdraw a smaller percentage to extend the life of your funds. However, using the four percent rule is a good place to start when you aren’t sure how much you’ll need.

Saving for retirement financial tips

2. Hire a Financial Advisor

When getting your retirement portfolio on track, financial advisors can guide you. They can show you options for formulating a plan to get you where you need to be. In an email to Annuity.org, Will Steinberger, a certified financial planner and founder of Think Different Financial Planning, outlined five ways financial advisors can help you:

  • “Advisors can help clients consider their options regarding Social Security. This also includes modeling what their future Social Security benefits will reasonably provide.
  • Understanding what the client's taxes will look like in retirement
  • Modeling what a realistic spending goal looks like
  • Understanding what health care costs could potentially be
  • Helping clients understand Medicare coverage, and the cost of health care if clients retire before age 65 (when Medicare kicks in)”

Financial advisors have years of experience and knowledge that can help you hit your retirement goals. However, each advisor has a different background and viewpoint, so it’s worth interviewing several advisors to find the best match for you.

3. Eliminate Debt as Quickly as Possible

According to a recent Experian study on American debt, the average American was $92,727 in debt in 2020. The interest rates associated with any form of debt can drain your pockets quickly, making it harder to save for retirement. By eliminating outstanding payments, you can put the money you would otherwise pay in interest into your retirement portfolio.

One method to eliminate debt as quickly as possible is referred to as the “snowball method.” As a snowball starts small and grows bigger with effort and momentum, so can your debt payments. Using this method, you pay off small debts first, thus gaining momentum to pay off larger obligations. Once your smallest debt is paid in full, you put the money you had budgeted for it toward the next smallest debt, and so on.

Here are the basic steps:
  • Step 1: Make a list of all your debts from smallest to largest — paying no attention to interest rates.
  • Step 2: Make the minimum payment on all of your debts with the exception of the smallest.
  • Step 3: Put as much money as possible into paying off your smallest debt.
  • Step 4: Once the smallest debt is paid off, roll the money you were using for that balance over to your budget for paying off the next smallest debt.
  • Step 5: Repeat this process until all debts have been paid in full.

Making a list of reasons you want to be debt-free can also help you stay focused in the process. Paying off your outstanding balances is hard work and does require consistency, but having reminders of why you’re going through the effort can help you stay motivated.

4. Create a Budget and Stick to It

Budget sheet for retirement planning

When you budget for retirement, you allocate a certain amount of money to each expense, which helps you see where you are overspending and where you can save more. In an email to Annuity.org, Paul Sundin, a certified public accountant and tax strategist at Emparion, suggested the following:

“Write down both your fixed expenses and variable payments. Fixed expenses include your mortgage or rent, car payment, cable, and other expenses that are the same every month. Variable payments are also regular payments you do monthly but with varying amounts, like groceries, gasoline, etc. For variable payments, you need to get the average amount by dividing the number by 12 months.”

By knowing how much you regularly spend in a year, you’ll have a better idea of how much money you’ll need for a comfortable retirement. You’ll also be better able to see the areas where you can reduce spending now to have a better retirement later.

Download the Retirement Planning Budget Sheet

5. Consider Downsizing

Your needs will change as you age. Caring for a large house and spacious backyard may become more of a hassle than a joy. Downsizing for retirement will give you some time back — no more mowing the lawn every week — while also allowing you to reserve more money.

You may also consider moving into a smaller house with a lower mortgage payment and renting out your other residence to bring in extra money. Likewise, for late starters saving for retirement, it may be necessary to cut back on nonessentials, such as a new car. Consider downsizing to a more cost-efficient vehicle if possible, and opt for something used to save a little extra cash.

6. Save, Save, Save

There’s no way around it — saving now is one of the biggest contributors to having money in your retirement years. While it may be difficult, it also helps you develop the discipline to spend less than you have coming in, which can, in turn, help you through the years you won’t be earning income. If you’re behind on your retirement planning, saving now becomes even more vital to having the money you’ll need later on. In an email to Annuity.org, Michael Shea, a certified financial planner with Applied Capital, suggested:

“You can’t hurt yourself by over saving. Make sure you’re allocating enough of your income into retirement. I’d recommend anywhere from 15 percent to 30 percent depending on your current retirement savings.”

These numbers can seem daunting if you aren’t used to setting aside that much money for retirement. They can also fluctuate depending on how much you need to save and for how many years. Talking with a financial advisor about the percentage you should be saving will help you more easily get on track.

7. Cut Down On Your Monthly Costs

By regularly reviewing the areas where you spend the most money, you can determine where to cut back to have a greater monthly cash flow in retirement. This could mean cutting back on eating out, expensive purchases or extravagant vacations. In an email to Annuity.org, Timothy Iseler of Iseler Financial LLC suggested:

“I recommend a one-month ‘spending fast,’ during which all expenses except the essential — like housing, utilities, groceries, insurance premiums, and debt payments — are paused. A month should be enough time to know which discretionary expenses will be easiest to control and highlight which others are most important.”

Not only will you find that you have a better idea of what retirement will look like with the amount you’ll have, but you’ll also see which expenses are easier than others to eliminate.

8. Consider Staying on the Job Longer

Many Americans have the mindset that working past the anticipated retirement age of 65 is a negative thing. However, working longer offers substantial financial and lifestyle benefits. In an email to Annuity.org, Patti Black, a certified financial planner with Bridgeworth Wealth Management advised:

“Consider working beyond ‘normal’ retirement age either on a full-time or part-time basis. Of course, there are financial benefits to working longer and reducing the nest egg you need to have saved for retirement. There are also non-financial benefits. Many retirees miss not having a purpose, and a meaningful job may help motivate you to get out of bed in the morning. In addition, work may provide a source of social connections as well as help you stay up to date on technology.”

Research supported through the Alfred P. Sloan Foundation about the power of working longer also found that if an employee works until age 67 rather than 66, any owned annuities are cheaper based on a few things:

  • Each dollar of savings converts to a larger annuity payment.
  • Wealth increases through the additional retirement contributions.
  • Social Security benefits increase by 8 percent above inflation.

Whether you’re 60, 50 or even 40 years old, working past the age of 65 increases the amount of time your money can work for you, hence increasing your retirement savings.

Financial tips for working beyond retirement age

9. Maximize Retirement Account Contributions

Contributing the maximum amount possible to retirement accounts is one way to make your money to work in your favor. Not only can you receive a tax credit toward contributions to your IRA, 401(k) plan or 403(b) plan, but retirement accounts also have less risk compared with mutual funds or stocks. And they earn a higher rate of return than bank savings accounts.

Additionally, employers often match contributions to 401(k) plans, helping you earn more money in the long run. The most common employer match is 50 percent of the employee’s contribution, up to 6 percent of their salary. Ask your employer if the company offers a 401(k) match program and how much it will contribute.

10. Consider Annuities

Purchasing an annuity can ensure that you have a guaranteed stream of income in retirement. While you may not be able to purchase an annuity for a few years, consider including this low-risk insurance product in your retirement plan. In an email to Annuity.org, Michael Potorti, a CPA and founder of Aurelius Resources, suggested:

“Annuities are a great way to set you up for a steady stream of income for the rest of your life. If something happened to you before or while you were in retirement, your beneficiaries would be able to receive a lump-sum payment of any amounts left over.”

One particular annuity for late starters to consider is a single premium immediate annuity (SPIA). You’ll pay a lump sum premium to an insurance company in exchange for guaranteed periodic payments. You can customize these payments to fit your needs by choosing to receive them monthly, quarterly or annually. The income payments, or benefits, you’ll receive from your SPIA will include any interest earned on the contract and a partial return of your premium.

Late starters who don’t have much time before retirement can benefit from the immediate income provided by a SPIA, which begins distributing income benefits within a year of the contract start date. However, if you have ten or more years before retiring, consider a deferred annuity, which won’t begin sending payments until years later. This will allow your contract value to grow as you continue working toward your retirement.

11. Take Advantage of Catch-Up Contributions

According to the IRS website, a “catch-up contribution is, generally, an elective deferral made by a catch-up eligible participant that exceeds a statutory limit, a plan-imposed limit, or the ADP limit (an “applicable limit”).”

You meet the age criteria of a catch-up eligible participant if you’re 50 or older during the calendar year in which the plan year ends. Thus, if you’re 50 years old or older and behind on saving for retirement, you are legally allowed to contribute $26,000 a year to a 401(k) plan.

Compared with a 401(k) plan participant under the age of 50 who is allowed to contribute only $19,500 to their plan, your benefits will be greater. The higher contribution amount and subsequent compound interest will have a big impact on growing your savings. The most common rate of return on a 401(k) account is 5 percent to 8 percent, which can be beneficial for your retirement planning.

Assuming the interest accrues at a 7 percent rate for 18 years, you’ll have just shy of $1 million when you retire if you contribute the maximum amount allowed each year. This doesn’t include other retirement contributions, pensions or Social Security benefits you may also receive. George Birrell, CPA and founder of TaxHub, mentioned to Annuity.org in an email:

“The IRS catch-up contributions allow people who are 50+ years old to save more in their retirement plans. The point is to help individuals who didn’t save enough in previous years to catch up and develop a better retirement plan. Putting the money you save from budgeting techniques towards these catch-up contributions can really help.”

IRS catch-up contributions retirement tip

12. Recover Your Lost Money

If you have an unused room in your house or a storage unit full of things you no longer need or want, you’re losing money. The same goes for any extra storage space that could be turned into money-earning opportunities. If you do have a spare room or basement, consider renting it out to supplement your income. If you aren’t ready to downsize your home, think about downsizing the number of things you have lying around and sell them online or to neighbors.

13. Start a Side Hustle

Starting a side hustle can help you earn extra income to put toward retirement and may keep you busy well into retirement. You could monetize a hobby or, leveraging the years of work experience under your belt, set up a consulting business. Michael Shea also points out that bringing in the extra income during retirement will prevent you from having to tap into your portfolio, thus allowing your assets to continue to appreciate.

Likewise, Lyndon Davis, a chartered retirement plan counselor and senior vice president of investments at Lyndon Davis Private Wealth Management of Raymond James, recommends gig economy employment and passive income opportunities as ways to boost your income.

Gig economy employment entails using a skill for a job every once in a while. This can include opportunities such as freelance writing or taking family photos. You get paid for each job, but you control which jobs you accept and how often you work.

Passive income opportunities, on the other hand, are those that you put effort into once and then see a return time and time again. Some examples include owning managed real estate property, affiliate marketing or selling stock photography.

14. Decide When to Claim Social Security

Aside from saving, investing and bringing in extra income, it’s also important to decide when you want to claim Social Security benefits. Although you can claim Social Security as early as 62 years of age, it isn’t always the most strategic option. The Congressional Research Service outlined in a recent report that “full retirement age” is between 66 and 67 years old, depending on when you were born — an important point to be aware of.

Brian Fry, a certified financial planner and founder of Safe Landing Financial, works regularly with clients in their 40s, 50s and 60s to plan their retirement. He shared his advice with Annuity.org in an email.

“To receive 100 percent of your Social Security benefit, you must wait until full retirement age. Each year that you claim before full retirement age, you give up between 5 percent and 6.67 percent of your full benefit. Benefits increase by approximately 8 percent for each year that you delay claiming Social Security after full retirement age.”

Consider your timeline now to avoid making costly mistakes by claiming Social Security benefits too early. It will also help you see how much money you need to save for those years you won’t receive Social Security benefits.

Financial tip on receiving 100% of social security benefits

While accumulating retirement savings late in the game can be stressful, it isn’t impossible. Speaking with a financial advisor, making a plan and implementing these strategies can put you on track. If you’re a late starter with a lump sum of cash, consider purchasing a deferred annuity. Deferred annuities allow you to defer your income benefits for many years. The longer you wait to receive your annuity income payments, the more your money can grow and work for you.

View the Retirement Planning Infographic
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Please seek the advice of a qualified professional before making financial decisions.
Last Modified: April 26, 2021

16 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

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