Jul 30, 2024
Shauna Sharpes, 60, is concerned about her financial future. With only $3,000 set aside for her retirement, the Washington resident is worried that the time to start saving is long past.
“The most important things for me right now are a place to live indoors, water and food, and thinking about how I’m going to provide that for myself from now until I drop dead,” Sharpes told The Wall Street Journal.
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Like many other younger baby boomers, Sharpes was impacted by the economic turmoil that has rocked the U.S. in recent decades.
She lost half of her 401(k) balance to the Great Recession and spent the rest on her home loan — despite early withdrawal penalties. She also found herself unemployed after the global recession, which was then followed by a divorce. Now, her retirement savings are gone.
Her goal is to save $100,000, pay off $260,000 in housing debt, and reduce her working hours by age 70.
The big question: is it possible to assemble some measure of financial security within a decade? Here’s how to course-correct.
How to start saving for retirement when you’re behind
When you're far behind on retirement savings, it may seem like a pipe dream to save $100,000 — but if you have a 10-year countdown ticking away, like Sharpe, the time is now.
Nearly one in four boomers said they didn’t start saving for retirement until they turned 50 — and more than a third of them still say they have no retirement savings at all, according to a survey from mortgage information website Anytime Estimate.
Using Sharpe as an example, if you started with $3,000, and wanted to accumulate $100,000 within a decade, you'd need to save around $568 per month, assuming a 7% average annual rate of return.
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If you don't make a lot of money and you also have competing financial goals — such as paying down debt — finding $6,816 a year to put toward a retirement plan probably isn't going to be an easy thing to tackle.
If you’re in the same boat as Sharpe, the best way to determine how much money you’ll need in your golden years is to create a budget based on your expected expenses and income sources.
You may need to consider different avenues to bolster your savings and boost your income. This can even include taking on a side hustle. Some ideas that are senior-friendly include dog walking, house cleaning, selling handcrafted items online, or working as a tour guide for a local gallery or museum.
Keep in mind that the age at which you dip into your Social Security determines your monthly benefit. The longer you wait (until age 70), the better your payout.
In addition, let’s not forget the importance of an emergency fund in retirement. You never know when an unexpected housing expense or medical bill will crop up and throw a wrench in your plans for retirement savings.
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Making the right financial moves
If all of those financial considerations are making your head spin, the good news is that you can start catching up by investing in the right accounts and taking advantage of tax credits.
Specifically, you can contribute to a tax-advantaged savings account, such as a 401(k) or IRA.
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In 2024, the 401(k) contribution limit is $23,000 and the IRA contribution limit is $7,000. Once you turn 50, however, you can start making yearly catch-up contributions to these accounts as well. You’re allowed to contribute up to $7,500 in a 401(k) and up to $1,000 in an IRA.
If you have access to a workplace 401(k), your employer may also match your contributions. If you get a 50% match, for example, you'd only need to invest around $375 a month to hit your $100,000 target. That's doable for many — especially if you have a job where you can put in overtime hours.
You can also aim to be a little more aggressive in your investments. If you can earn a 10% average annual return by putting most of your money into the stock market, for example, you'd need to save just $482 per month instead of $568 mentioned earlier.
And although you’d have to take on a little more risk, the S&P 500 has consistently produced 10% average annual returns over the long haul.
While you’re at it, it may also prove beneficial to consult a financial adviser to help you plan your retirement journey — especially if you have a lot of catching up to do.
In the end, you still might not have the luxury of becoming a wealthy retiree, but every dollar you save can get you closer to financial security and a happy retirement.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
